An investment advisor’s liability for the re-payment of a transition loan is a simple matter of contract interpretation and can be determined by way of summary judgment. The full text of the decision can be accessed here.

The dealer provided the advisor with a $600,000 transition loan when he joined in 2011 and a $60,000 to his assistant pursuant to an agency agreement (the “Agency Agreement”). The Agency Agreement contemplated that   if the relationship was terminated – for cause or without cause – the transition loan was to be repaid to the dealer immediately, with interest.

Shortly after joining the dealer, the advisor was terminated with notice and without cause. The dealer also demanded immediate repayment of the transition loan with interest pursuant to the Agency Agreement.

The dealer brought an action for repayment of the loans against the advisor. The advisor brought a counterclaim and resisted the motion with the allegation that the dealer breached its duty of good faith.
The Court held that while there were issues requiring a trial whether the dealer owed a duty of good faith and whether it was breached, there was no question that the advisor had an obligation and failed to repay the transition loan.


Maureen Doherty


Litigation and Arbitration
Securities Litigation