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Employee Forgivable Loans (EFL)

Employee Forgivable Loans, more commonly known as EFL’s or promissory notes within the securities industry are commonly offered by brokerage firms to potential hires with a demonstrated track record and book of business. EFL’s are designed as a recruiting incentive as well as assistance to a broker or team of brokers transitioning to a new firm.

EFL’s or promissory notes are based in part on a broker’s revenue most often calculating by the representatives trailing 12 month commissions. EFL payments are routinely conditioned on a term that typically ranges between 6 and 8 years with a percentage of the overall loan forgiven each year. If the financial advisor leaves the firm before the expiration of the term, a broker may owe the balance due to the employer.

EFL disputes by Wall Street employers are conducted by binding securities arbitration at the Financial Industry Regulatory Authority (FINRA). Disputes also arise when an employer engages in wrongful conduct requiring the employee to leave the firm. Often such employment disputes are heard as a single case before a panel of FINRA arbitrators.

Post termination issues including EFL’s need to be addressed in a timely manner. Aidikoff, Uhl & Bakhtiari has assisted industry professionals with disputes over employment compensation and EFL’s.


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