Overview
Employment Agreements are essential for Financial Services organizations. This comprehensive guide covers the critical clauses, best practices, and industry-specific considerations you need to understand when creating or reviewing a employment-agreement.
Key Considerations for Financial Services
- Define licensing and registration requirements. Financial services employment agreements must specify required securities licenses (Series 7, Series 65), registrations, and continuing education.
- Address client assets and discretionary authority. Clarify limitations on discretionary trading, investment recommendations, and management of client portfolios.
- Establish clawback and forfeiture provisions. Include clauses allowing recovery of compensation if regulatory violations occur or client complaints are substantiated.
- Define compensation structure. Clarify base salary, bonus calculations, performance metrics, and conditions for clawback of incentive compensation.
Essential Clauses
When drafting a employment-agreement for the Financial Services sector, these clauses are critical:
- Position and Duties: Clearly define the job title, role, responsibilities, and reporting structure.
- Compensation and Benefits: Specify salary, bonus structure, health insurance, retirement plans, and other benefits.
- Employment Term: Define whether employment is at-will, for a fixed term, or contingent on specific conditions.
- Confidentiality Obligations: Require protection of company confidential information, trade secrets, and proprietary data.
- Intellectual Property Assignment: Clarify that work product and inventions created during employment belong to the company.
- Termination and Severance: Specify grounds for termination, notice requirements, and severance terms.
- Post-Employment Obligations: Address non-compete, non-solicitation, and non-disparagement obligations post-employment.
Best Practices
Follow these recommendations to create a robust employment-agreement for your Financial Services needs:
- Verify securities licenses. Ensure all required securities licenses (Series 7, Series 65, etc.) are current and in good standing.
- Define compensation and clawback. Include specific clawback provisions allowing recovery of compensation if regulatory violations occur.
- Establish supervisor approval requirements. Clarify when supervisory approval is required for investment recommendations and portfolio adjustments.
- Address regulatory compliance explicitly. Include requirements for regulatory compliance and consequences for violations.
- Define discretionary authority limits. Specify maximum investment amounts, asset allocation restrictions, and when supervisory approval is required.
- Establish conflicts of interest protocols. Define procedures for disclosing and managing conflicts of interest.
Frequently Asked Questions
An Employment Agreement for Financial Services should include job title, responsibilities, compensation, benefits, work schedule, confidentiality obligations, intellectual property assignment, and termination provisions. Industry-specific items for Financial Services may include licensing requirements, non-compete provisions, or performance metrics.
Yes, non-compete provisions are common in Financial Services employment agreements, though enforceability depends on state law and whether restrictions are reasonable. Courts generally enforce non-competes that are limited in time (12-24 months), geography, and scope of prohibited activity.
The employment agreement should clarify that all work product, inventions, and intellectual property created during employment belong to the employer. This is particularly important in Financial Services where innovation and proprietary methodologies are valuable business assets.
The agreement should specify the treatment of health insurance, retirement plans, and other benefits upon termination. Depending on the arrangement, benefits may continue through COBRA, be discontinued, or transition to other coverage. Clarify severance terms and final compensation procedures.