Broker/dealers often have referral arrangements with their existing advisors which pay compensation in cash or stock when new advisory groups sign with the broker/dealer as a result of the original advisor's referral. Those referral agreements are intended to be mutually beneficial arrangements that spur growth for the broker/dealer and, when paid in stock, align the referring advisor more closely with the broker/dealer. However, when broker/dealers seek to cut costs, referral arrangements may be some of the first "perks" they stop honoring.
Our firm recently represented a client in such a matter. After referring a successful advisory group to his broker/dealer, our client was entitled to receive a portion of the broker/dealer's company stock. However, a management shakeup resulted in the new management refusing to pay the promised stock. Instead, they offered a cash payment only. Due to an increase in the broker/dealer's valuation, the stock our client should have received was worth substantially more than the cash payment.
Amid my client's efforts to get paid for his referral, the new management team changed the commission structure and asserted that our client had wrongfully retained commissions due to chargebacks and refunds. Eventually, the broker/dealer filed a breach of contract claim in FINRA arbitration to attempt to claw back commissions they claim our client wrongfully retained.
Our client retained us to pursue his claims related to this matter and to defend against the broker/dealer's claims. We immediately filed counterclaims on his behalf for breach of contract & fraudulent inducement. The matter culminated in a settlement agreement where the parties chose to "walk away" from their respective claims. Our client kept the proceeds of his sales under the original commission structure while walking away from the ownership interest in the broker/dealer - an acceptable resolution as our client had already successfully transferred his business to a new broker/dealer.
If your broker/dealer promised a referral fee but then sought to make the fee back through a change in commission structure or in another way, you may have a cause of action. Contact the attorneys at Cosgrove Simpson to discuss your options.