An ex-Morgan Stanley broker has sued the wirehouse in an effort to recover the deferred compensation that he forfeited when he left the company in 2018.
In a complaint filed Wednesday in U.S. District Court for the Southern District of New York in Manhattan, broker Matthew Timothy Shafer of Florida said Morgan Stanley violated the Employee Retirement Income Security Act of 1974 by illegally withholding the deferred compensation from him and other advisors after they left the firm.
Morgan Stanley declined to comment Monday on the suit, which is seeking class-action status on behalf of “thousands” of other former advisors at the firm whose deferred compensation was also withheld.
Shafer is seeking a recovery of the funds withheld from him and other defendants yet to be named, as well as compensatory damages, among other relief.
Morgan Stanley allocates 75% of an advisor’s deferred compensation to the Morgan Stanley Compensation Incentive Plan that vests in six years (after previously vesting in eight years) and 25% of their deferred compensation to the Morgan Stanley Equity Incentive Compensation Plan that vests in four years, according to the complaint.
Morgan Stanley causes advisors to “forfeit their deferred compensation if they leave Morgan Stanley before these vesting dates,” the complaint alleges.
The FA Deferred Compensation Program is an “employee benefit pension plan” under ERISA because it “results in a deferral of income by employees for periods extending to the termination of covered employment or beyond,” according to the complaint.
Shafer worked as an advisor at Morgan Stanley from 2009 to 2018. “When he left Morgan Stanley, Defendants invoked the Cancellation Rule to deny him over $500,000 in deferred compensation that he earned under the FA Deferred Compensation Program,” according to the complaint.
Shafer has been a rep for Raymond James & Associates since leaving Morgan Stanley, according to a report on the Financial Industry Regulatory Authority’s BrokerCheck website.
Prior to Morgan Stanley, he worked for Citigroup in 2009 and UBS from 1997-2009. He is currently registered as a broker and investment advisor. There are no disclosures on his report for his 23 years in the industry.
Early last year, rival Wells Fargo agreed to pay $79 million to settle a similar class-action complaint related to deferred compensation for former advisors at that firm.