What the FACAAP Is Going On Here?

October 14, 2010

In a FINRA Arbitration Statement of Claim filed in April 2009, associated persons Willard Rumley and Albert Montague alleged that their former employer Merrill Lynch had engaged in breaches of contract/fiduciary duty, among other allegations, and Claimants requested

  • that Respondent Merrill Lynch place the contents of the Claimants' Financial Advisor Capital Accumulation Award Plan ("FACAAP") and Growth Award plans in trust pending resolution of this dispute;
  • that Respondent vest and pay Claimants the value of their FACAAP and Growth Award plans as defined in the plan agreements (at least $1,388,898.00);
  • an unspecified amount of damages to compensate Claimants due to Respondent's breach of its fiduciary duty and duty of good faith and fair dealing;
  • punitive damages due to Respondent's intentional breach of contract and inappropriate retention of Claimants' equity compensation;
  • daily interest at the Florida statutory rate based on the value of their unpaid FACAAP and Growth Award as of the date of resignation until full payment by Respondent; and
  • attorneys' fees and costs incurred in obtaining the wrongfully withheld FACAAP and Growth Award.

Respondent generally denied the allegations and asserted various affirmative defenses.

During the evidentiary hearing, Claimants withdrew Count V of their Statement of Claim which requested that the Panel impose of a constructive trust by Respondent and in favor of Claimants.

The FINRA Arbitration Panel found Respondent Merrill Lynch liable for breach of contract and shall pay to

  • Claimant Willard Lee Rumley: $587,126.00 in compensatory damages, inclusive of interest; and
  • Claimant Albert Alexander Montague: $580,220.00 in compensatory damages, inclusive of interest 

Bill Singer's Comment:  Consider this explanation at http://phx.corporate-ir.net/External.File?item=UGFyZW50SUQ9Mzk5NDd8Q2hpbGRJRD0tMXxUeXBlPTM=&t=1 , page 65, "REPORT AND CONSOLIDATED FINANCIAL STATEMENTS MERRILL LYNCH INTERNATIONAL BANK LIMITED FOR THE PERIOD ENDED 31 DECEMBER 2009":

Financial Advisor Capital Accumulation Award Plans ("FACAAP")

Prior to 2009, the FACAAP provided for awards to eligible employees in Merrill Lynch's Global Wealth Management division generally based upon their prior year's performance. Payment for an award was contingent upon continued employment for a period of time and subject to forfeiture during that period. Awards granted in 2003 and thereafter are generally payable eight years from the date of grant in a fixed number of shares of Bank of America common stock. For outstanding awards granted prior to 2003, payment is generally made ten years from the date of grant in a fixed number of shares of Bank of America common stock unless the fair market value of such shares is less than a specified minimum value, in which case the minimum value is paid in cash. FACAAP is no longer an active plan and no awards were granted in 2009.

Also, see this recent federal case in which the United States District Court for the Southern District of California dismissed a lawsuit by three former Merrill Lynch financial advisers who forfeited $5 million in deferred compensation when they left the firm. Those advisors argued that the forfeiture provisions in several of the brokerage's deferred-compensation plans  (including FACAAP) violated labor laws. See, http://online.wsj.com/article/BT-CO-20100908-713078.html