Bank of America to sign broker recruiting pact-memo

NEW YORK, Nov 6 (Reuters) - Bank of America Corp (BAC.N), aiming to calm nervous Merrill Lynch & Co Inc MER.N financial advisers, has agreed not to sue those who leave for rivals as long as the rivals follow a key industry protocol, according to a pair of internal memos obtained by Reuters on Thursday.

The four year-old industrywide agreement, known as the Protocol for Recruiting Brokers, allows an adviser to bring clients as long as the adviser's new employer is also a party to the agreement.

Bank of America's decision to continue to adhere to the pact amounts to a major effort to retain 16,800 brokers at Merrill Lynch, the world's largest wealth management company, which BofA expects to acquire late next month.

The move is the second in two weeks by Bank of America to try to head off a potential exodus at the highly valued brokerage operation -- described by Bank of America Chief Executive Kenneth Lewis as Merrill's "crown jewel."

Late last month, Bank of America announced compensation packages aimed at discouraging Merrill brokers from jumping ship, although the terms met with a lukewarm reaction, according to some brokers.

One Merrill broker who wished to remain anonymous said the decision was welcome news to a growing number of brokers who were dissatisfied following the Oct. 24 announcement of retention packages. The firm has stated it anticipates a 15 percent exit rate that could double if BofA fails to soothe those concerns, according to the broker.

"Bank of America never wanted to sign on to this agreement, and has traditionally been very aggressive with taking legal action against brokers who leave the firm," said Thomas Lewis, an employment litigation lawyer at Stark & Stark in Princeton, New Jersey, who advises Merrill brokers.

"Since Merrill brokers have until Nov. 14th to accept their retention packages, many were anxious about rumors that Merrill itself would step out of the agreement, leaving them with much less protection," he said. "The power balance is now back to the brokers."

Last Friday, Merrill distributed a memo to its Global Wealth Management field offices in an attempt to calm brokers who were hearing the rumors it would drop the agreement.

"Merrill Lynch, Pierce, Fenner & Smith Incorporated is currently a member of the protocol and will remain a member after the transaction closes," the Friday memo said.

The protocol, created in 2004 by Merrill, UBS, and Citigroup Inc (C.N) Global Markets (Smith Barney), is far from ironclad, as those who sign it can opt out with just ten days written notice.

If an adviser goes to work for a company that does not adhere to the protocol, lawsuits from the prior employer are likely to follow.

"I don't see Bank of America blowing out of the protocol, said Joseph Dougherty, an attorney at Philadelphia based Buchanan Ingersoll and Rooney

"Signing on to the pact could be a recruiting tool, as many big firms will poach from each other," he said. "Those other guys will be watching this development very closely." (Editing by Jeffrey Benkoe)