(Reuters) - An arbitration panel denied Morgan Stanley Smith Barney's request to claw back compensation from two brokers and, instead, awarded the brokers about $1.5 million.
Morgan Stanley's wealth management unit had asked the Financial Industry Regulatory Authority (FINRA) arbitration panel to make Jorge Antonia Carreras and Carlos Javier Molina repay funds paid to them under a promissory note agreement.
The brokers filed a counterclaim alleging the firm breached contracts related to commissions and bonuses and for negligent misrepresentation.
When the brokers were recruited to Morgan Stanley from Merrill Lynch, a significant part of the pitch was that they would be able to manage assets from their high-net-worth Latin and South American clients on Morgan Stanley's Swiss platform, said the brokers' lawyer Jacob Buchdahl, partner with Susman Godfrey LLP in New York.
The bank later decided to stop its New York brokers from using the Swiss platform, which caused "tremendous problems" for the brokers, Buchdahl said.
The panel concurred with the brokers and said that Morgan Stanley changed the work environment surrounding the Swiss platform and caused the brokers a significant loss in commissions.
The panel awarded Carreras $655,786 in compensatory damages. Molina was awarded $834,637.
The two brokers have since then moved to Barclays (BARC.L).
A Morgan Stanley spokeswoman declined to comment.
Reporting by Jochelle Mendonca; Editing by Anil D'Silva