Three former Morgan Stanley financial advisers sued the U.S. Department of Labor, alleging that it issued an illegal advisory opinion that could torpedo hundreds of arbitration claims against the bank. The plaintiffs are challenging Morgan Stanley’s cancellation of their deferred compensation in Finra arbitrations.
At issue is whether the deferred compensation plans for financial advisers are governed by the Employee Retirement Income Security Act of 1974 (“ERISA”). The plaintiffs — Steve Sheresky, Jeffrey Samsen, and Nicholas Sutro — allege that Morgan Stanley (MS) sought and received an advisory opinion from the Labor Department in September that said the plans weren’t covered by ERISA.
However, the suit alleges that two previous court rulings found that the plans are governed by ERISA, and that the cancellation of the deferred compensation violated ERISA, the complaint said.
This lawsuit isn’t against Morgan Stanley (MS). However, the plaintiffs are among 12 financial advisers who previously sued the bank for not paying their deferred compensation when they left the company. The case has broader implications in that it could affect the hundreds of other former Morgan Stanley financial advisers challenging the cancellation of their deferred compensation.
“In contravention of both the law and its own policies, the DOL issued an advisory opinion on September 9, 2025,” the plaintiffs’ attorney stated in the suit. “In many ways, the Advisory Opinion is a textbook example of an arbitrary and capricious agency action that violates the Administrative Procedures Act.”
The suit asks that the court vacates and set aside the advisory opinion.
“The Department of Labor violated its own procedures, ignored ERISA’s language and case law, and accepted Morgan Stanley’s position about inapplicable proposed rules and regulations when it issued the advisory opinion,” Doug Needham, an attorney at Motley Rice representing the plaintiffs. “This case seeks to stop an illegal agency overreach by the Department of Labor by having the court rescind the advisory opinion. This is exactly what Administrative Procedure Act was designed to prevent.”
Morgan Stanley (MS) declined to comment.
Morgan Stanley (MS) stock ticked down 0.1% in midday trading on Wednesday.