Sting from Merrill's International Shift Lingers

By Michael Wursthorn and Christina Rexrode 

Bank of America Corp. is being accused of misleading some of its Merrill Lynch brokers after introducing changes to its international dealings that a lawsuit alleges "devastated" the brokers' businesses and relationships with clients.

Lawyers for three former Merrill brokers -- part of the so-called Thundering Herd, who worked in the U.S. but focused on clients in foreign countries -- said the brokers were "significantly hindered" by changes introduced by the bank in July 2015. Those changes included slashing the number of countries in which the bank could target clients and curtailing the brokers' ability to travel outside the U.S.

Merrill also mandated that international clients still serviced by the firm have to travel to the U.S. to meet with their broker at least once a year.

An amended complaint to the lawsuit, filed Tuesday in federal court in the Western District of North Carolina, alleges that the bank misled its brokers to believe the firm was committed to serving international clients to keep the brokers from leaving the firm.

"They were recruiting financial advisers into the firm...without telling them they planned this change," said Michael Taaffe, a lawyer at Shumaker, Loop & Kendrick LLP in Sarasota, Fla., which is representing the former Merrill brokers.

Mr. Taaffe said the suit, which seeks class-action status, aims to hold Merrill accountable for how its decisions harmed brokers' businesses and to ensure the brokers are adequately compensated.

Brokers at firms such as Merrill can keep their client relationships as they move from one firm to another and the revenue they generate from those clients factors into how they are paid. Mr. Taaffe says some brokers affected by the changes have lost more than half of their clients because of the loss of access to business in the clients' home countries and other restrictions.

Mr. Taaffe also alleged that many brokers were blindsided by the changes as they contradicted statements made directly to brokers and publicly by Bank of America Chief Executive Brian Moynihan. "Wealthy clients, corporate clients and institutional investors...operate around the globe. We have been building out our capabilities to serve them in all those markets," Mr. Moynihan said in a late 2010 speech, according to the suit.

Merrill has lost dozens of brokers in the wake of the changes. When Bank of America reported fourth quarter 2015 and first quarter 2016 earnings, it said departures tied to the changes in its international business dragged down its broker head count in those periods.

Merrill didn't immediately comment on the lawsuit or its allegations.

Miguel Sosa was one of the brokers who left Merrill during that period. At the bank, he served mostly wealthy investors in Spain and the Caribbean, but, after the changes, his Spanish business was eliminated and his work in the Caribbean was either "eliminated or severely restricted, depending on the client's country," according to the complaint. Since leaving Merrill, Mr. Sosa launched his own firm, Premia Global Advisors LLC in Coral Gables, Fla.

Because of Merrill's changes, Mr. Taaffe said the brokers "lost a lot of clients because clients don't want to change firms repeatedly," adding that the clients are the brokers' "lifeblood."

Write to Michael Wursthorn at [e-mail] and Christina Rexrode at [e-mail]

(END) Dow Jones Newswires

November 23, 2016 15:11 ET (20:11 GMT)

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