Notice to Clients: Defense of Promissory Note Cases

When moving to a new firm, many brokers receive "upfront money" in the form of a promissory note from their employing firm. Most times these funds are loans, forgivable over time or repayable entirely. In either case, the broker is responsible for payment of the entire loan balance. While there is no defense to nonpayment, brokers can offset firm claims against them in a number of ways. For example, brokers can assert, among other things, the firm's failure to honor its promises to the broker or that the firm engaged in practices that inhibit or destroy the broker's business. Many times it is more advantageous for the broker to commence the suit before the firm so the broker is in the more favorable role of plaintiff/claimant as opposed to defendant/respondent.

In one such case, a broker received a forgivable promissory note when moving to a new firm. The hiring firm, a broker-dealer, promised the broker that the firm would service a large trading account that wanted direct access to the firm's trading desk, both to place orders and to speak with traders on the desk. This trading account was a large part of the broker's commission business and the broker would not have moved to the new firm unless the trading account was agreeable and comfortable with this arrangement. In fact, the trading account met with the new firm trading desk before the broker moved to the new firm and the broker was assured of such access.

However, despite the firm's promise and the account's agreement, the new firm's trading desk refused to deal with the large trading account from the time the broker moved to the new firm. As a result, the trading account closed, causing the broker a loss of significant income. The broker ultimately left the firm. The firm, thereupon, commenced an arbitration against the broker to recover the amount outstanding on the loan. The broker, on the other hand, claimed the firm had not lived up to its promise in relation to the trading account. The firm's failure in this regard caused the broker loss of significant commission revenue and ultimately forced him out of the firm. The broker prevailed in the arbitration and the firm recovered nothing.

The law firm of Wexler & Burkhart has been successful in asserting offsetting claims against broker-dealer firms that sue for the breach of a broker's promissory note where the firm failed to meet its obligations or interfered with the broker's business. If you would like further information regarding offsetting a promissory note claim commenced against you please do not hesitate to contact us today.

Wexler & Burkhart partner Martin P. Unger has a substantial amount of experience with promissory note cases (view Marty's profile). If you are a broker either involved in or anticipating a claim on a promissory note please do not hesitate to contact Marty at (516) 222-2230 or

Brian A. Boxler is a Wexler & Burkhart associate concentrating in the firm's securities and complex commercial litigation practice groups (view Brian's profile). Brian can be reached at (516) 222-2230 or at


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