When a broker transfers firms, the new firm will often pay the broker a bonus to induce him to transfer firms, and to help him in the transition. The “bonus” is structured as a forgivable loan, and is evidenced by a promissory note. The “bonus” is paid at the time the broker transfers to the firm, and is forgiven over a period of years, either monthly or annually, depending on the policies of the firm. Each forgiveness is taxable to the broker, as income.

The forgivable promissory note has potential damaging issues for the broker, because it is also payable, in full, if the broker is no longer employed by the firm, for any reason, whether he resigns or is fired. Firms can, and will, attempt to enforce the note, even when they fire the broker. FINRA rules regarding broker conduct and promissory notes are complex, and generally require the assistance of an experienced securities lawyer for a favorable outcome.


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Mark Astarita

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