Merrill Submits $40 Million Class-Action Settlement With Ex-Brokers

By Caitlin Nish and Corrie Driebusch - Dow Jones Newswires

NEW YORK--Merrill Lynch presented a proposed class-action settlement Friday that envisions paying about $40 million to some 1,500 of the company's former brokers.

The settlement was put before a federal judge in New York City and requires her approval. It would compensate the brokers for deferred pay that they were denied when they left Merrill in the wake of the firm's 2008 acquisition by Bank of America Corp. (BAC).

The brokers would receive between 40% and 60% of the value of their deferred plan accounts, depending on when they left Merrill and whether they made claims for their deferred compensation or initiated litigation or arbitration.

Both parties will need to submit a renewed proposal in court by Sept. 6.

The settlement applies only to those brokers who generated about $500,000 or less in annual fees and commissions. Brokers in that category are estimated to total about 1,500 and would be able to decide whether to be members of the class or to opt out and pursue their own individual claims in the Financial Industry Regulatory Authority's arbitration forum.

Another 1,500 brokers who were higher producers also the left the firm after the acquisition, and any claims by them wouldn't be covered by the settlement.

Brokers' contracts typically required them to remain employed for several years before they gained vested rights to their deferred compensation, which they could claim only in a shorter time frame if they left for good reason. At issue is whether Merrill Lynch's September 2008 sale to Bank of America, and the changes that accompanied that event, constituted a good reason.

In the class action, lawyers argued that a new pay scheme introduced after the acquisition reduced the pay of lower- producing brokers and gave them good reason to leave.

Merrill Lynch had multiple deferred-compensation programs. In documents filed in the class-action case, a Merrill Lynch human resources and compensation executive estimated the average amount each former broker had in one of the accounts was $36,000 and in another $16,000.