[ by Melanie Gretchen and Howard Haykin ]

An arbitration panel rejected the Morgan Stanley Smith Barney (MSSB) claim for repayment of funds paid under promissory note agreements to 2 recently-departed brokers.  The panel, instead, turned the table on MSSB, and ordered the firm to compensate the brokers for damages arising from he firm's breach of contract and negligent misrepresentation.  The brokers were represented by Jacob Buchdal, a partner with NY-based Susman Godfrey LLP.

FINRA Findings and Allegations. Jorge Antonia Carreras and Carlos Javier Molina were recruited to MSSB from Merrill Lynch, largely on the the sales pitch that they would be able to manage assets of their high-net-worth Latin and South American clients on Morgan Stanley's Swiss platform.  However, MSSB later decided to stop the practice of permitting New York brokers from using the Swiss platform.  This according the claimants' counsel, caused "tremendous problems" for the brokers.  Both brokers argued that MSSB changed the work environment surrounding the Swiss platform and that caused them a significant loss in commissions.

The panel agreed with the brokers's argument, and ordered the firm to pay the brokers more than $1.5 million in compensatory damages - Carreras awarded $656,000 and Molina $835,000.  the brokers now are associated with Barclays.

For further details, go to [Reuters, 2/27/13].