NEW YORK — For two former brokers, crime really does pay.
Eric Butler and Julian Tzolov won an arbitration battle recently against former employer Morgan Stanley, a year after Butler was convicted of, and Tzolov pleaded guilty to, several counts of securities fraud.
The brokers won’t have to return the $4.45 million that Morgan Stanley lent to each of them as a signing bonus three years ago, according to a ruling by the Financial Industry Regulatory Authority, or Finra.
Brokers, when they move to a new firm, receive a bonus that is often equal to roughly twice the revenue they generated over the past year at their prior firm. These bonuses are in the form of loans secured by promissory notes, meaning brokers have to pay back the loan balance if they leave before the note expires several years later.
Brokers rarely avoid repaying the money when they leave early, because Finra almost always honors the airtight promissory notes.
But Butler and Tzolov are an unusual case. The two brokers moved to Morgan Stanley from Credit Suisse Group in September 2007. A year later, they left Morgan Stanley when they faced securities-fraud, wire-fraud and conspiracy charges from their time at Credit Suisse. They were accused of misleading clients about the nature of the auction-rate securities they were buying.
