Brokerage firms commonly recruit stockbroker to gain access to their books of business. Typically, brokerage firms offer up-front payments in the form of forgivable loans or promissory notes to lure brokers. If the broker stays with the brokerage firm through the duration of the forgivable loan or promissory note, the broker is not obligated to repay the money if the broker then leaves the firm. But if the broker resigns or is terminated before the loan or note is fully forgiven, the brokerage firm generally expects the broker to pay back to unforgiven portion of the loan or promissory note.
When the brokerage firm requests payment of the amount due
(or sues), there may be counterclaims the broker can make that justify his or
her refusal to repay the outstanding portion of the loan or promissory note,
including fraudulent employment law practices, false promises, wrongful
termination, or breach of contract. The result often is that the broker
ends up paying a lot less than the firm says it is due or, the arbitration
panel may declare the outstanding note paid and, to boot, award the broker
compensation for the firm’s wrongdoing!