It was an unusual victory, legal experts say: A former Morgan Stanley advisor won $150,000 in arbitration from his former firm for "emotional distress."

"It is difficult for employees to recover from the firm unless it is a truly outrageous situation," explains William Jacobson, director of the Securities Law Clinic at Cornell University. "For example, where the firm sets out not just to protect its own interests but to purposely damage the employee -- in those circumstances, where there is an indication of vindictiveness, employees tend to do much better."

A FINRA arbitration panel recently ordered Morgan Stanley to pay damages to a former advisor, H. Peter Petrosky, whom the firm had terminated. While the panel said Morgan had the right to discharge him, it also found that the manner in which it was done was a "rush to judgment" that caused unnecessary harm.

Advisors frequently fight back after terminations, often claiming breach of contract, but they usually lose in arbitration. What makes this case different, experts note, was that Petrosky sought damages for slander and disparagement -- both of which he won -- in addition to breach of contract, which he lost.

"My personal experience, and I've been on a few dozen cases, I've never seen disparagement [claimed] before," says Ronald Colombo, a professor of law at Hofstra University. "Factually speaking, this probably doesn't happen all that much. And to raise it to a claim in arbitration is rarer still."

CONTRACT LANGUAGE

Legal experts say that another reason his win is a rarity is the language in the contracts advisors sign with their firms.

"Usually, the firms do manage to win because the language in the contracts is so strongly in their favor. But the panels I've been on have wrestled with great difficulty over the language in these contracts," says Colombo.

He notes that advisors often put forth stories that pull at the heart strings of arbitrators, saying that they were given a hard deal. But arbitration panels also have to consider the language of the employment contract, and weigh the evidence carefully.

That process is often more difficult than outsiders realize, Colombo says.

"Even though the firms usually win these cases, that doesn't suggest that they win them easily. There is a lot of handwringing before those decisions are made, but you don't see that," he says.

Another possible reason such victories are rare: Many valid claims may get settled before an arbitration panel actually makes a decision, notes Brent Burns, an attorney in Alpine, N.J., who has 18 years of experience representing advisors in arbitration

UNDEFINED 'DISPARAGEMENT'

The FINRA records don't specify exactly what "disparagement" or "slander" actually took place. Yet these advisor-firm divorces can often be messy.

Whenan advisor leaves or is forced out, the competition for his or her clients can become fierce, say former wirehouse branch managers.

"It's a real negative atmosphere when someone wants to take their book with them. The whole process is adversarial. You're prone to have issues," says Tony Sirianni, a former Morgan Stanley Smith Barney complex manager who is now managing partner of Sirianni Strategy Group -- a consulting firm that works with advisors leaving wirehouses to go independent.

An advisor's former colleagues can act very aggressively to keep clients' assets at the firm, says one former branch manager, who asked not to be named: "It's not uncommon to say bad things because of the nature of a transition -- even by saying nothing when a client asks, 'Why did he leave?' or replying, 'I can't get into it.'"

That kind of innuendo can be very damaging to the departing advisor, Burns says. "A good branch manager will clamp down on that," he says. Such a manager, Burns adds, would "say to his advisors, 'Don't say anything about the departing broker. Stay positive, don't go negative.' "

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