Ex-Merrill Lynch Broker Exposes Firm in New Book

In July 1991, Keith Schooley joined Merrill Lynch as a financial consultant trainee in a small Oklahoma branch office. He scored 93.2 percent on the Series 7 exam and ranked among the top ten rookie producers in his division. Fourteen months later, he was out of the securities industry for good. His new book, Merrill Lynch: The Cost Could Be Fatal, is a first-person account of what happened in between—and of the nine-year fight that followed.

The book's title comes from the firm's own general counsel, who warned in a 1992 employee publication that letting integrity take second place to revenue would cost the firm more than dollars: 'The cost could be fatal.' Schooley, who says he joined Merrill Lynch in part because of its reputation for ethics, took that language literally. Citing the firm's written requirement that employees report improprieties to whatever level of management is necessary, he wrote a four-page memo to his branch manager, then a 31-page letter to all thirteen members of the board of directors. What followed, as Schooley tells it, was two internal investigations, inquiries by the SEC, the NYSE, the NASD and two state insurance departments, his own termination, a forced move into binding securities arbitration, a four-day hearing, and more than a decade of appeals—none of which produced the outcome he was looking for. The arbitration panel awarded him nothing.

Schooley does not hide that result. The book opens with a foreword by his former attorney, Stephen Jones, who states plainly that Schooley lost, and who argues the real subject is not one man's case but whether investors should have claims decided by arbitrators rather than juries. Jones tells readers that each of them becomes 'one of the jurors he never had.' The book reconstructs the dispute from Schooley's memos, letters, regulatory correspondence, recorded telephone conversations and the transcript of the arbitration hearing, including the testimony of the firm's own compliance and legal executives. It also documents what the fight cost him personally: a bankruptcy, a divorce, and a securities-industry record that he says made him unemployable at every firm he approached. Schooley grew up in Oklahoma City, earned a B.B.A. from the University of Oklahoma and an M.B.A. from Oklahoma State University, and worked in oil and gas before turning to Wall Street. He lives in Enid, Oklahoma. Merrill Lynch: The Cost Could Be Fatal presents one former employee's account of his dispute with his employer. The allegations described in the book are the author's. The arbitration panel ruled in the firm's favor, and no regulator brought a formal enforcement action. The book is available now.