UBS asks court to quash $1M arb award

UBS is going to court to try to overturn a $1 million arbitration penalty it was slapped with last month after a FINRA panel questioned its reasons for firing one of its brokers.

UBS filed a petition last week in federal court for the U.S. district of Idaho to kick out the $1 million in compensatory damages it was hit with in early June in a case involving allegations of wrongful termination, breach of contract, age discrimination, defamation and other violations. In an unusually detailed decision, two members of the three-person Financial Industry Regulatory Authority arbitration panel hearing the dispute sided with the fired broker, Randy Anderson. In 2020, UBS had let Anderson go, alleging that he executed nearly $480,000 in trades on behalf of a client without first obtaining her permission.

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Two of the three FINRA panelists who handed down the $1 million penalty granted Anderson his claims of age discrimination, among other things: “Claimant was above 60 years and the termination was disproportionately severe,” the panel noted.

Dissent: Panel heard no evidence of discrimination

But in an equally lengthy dissent to the majority opinion, a third panelist said the claim of age discrimination made in Anderson’s initial complaint barely came up in hearings before the arbitration panel. “The only mention of the age discrimination claim occurred when Claimant was asked at the hearing whether he had heard any remarks from [UBS] concerning his age and he answered ‘no,'” wrote the dissenting panelist, a lawyer named Dean Dietrich.

Rather than his age, Anderson implied at the hearings that he was let go because UBS was worried he was planning to take his book of business to a competitor, Dietrich wrote. With no actual evidence of discrimination, the $1 million penalty UBS was ordered to pay is “absurd on its face,” the firm argued in its court petition seeking to have the award overturned. 

“At the arbitration hearing, Anderson did not provide any evidence or legal argument to support his age discrimination claim, and the panel did not identify any such evidence in its findings,” UBS argued. “Nor did Anderson or the panel majority make any attempt to apply the legal framework for age discrimination.”

“UBS believes that the majority’s award in this matter is irrational on its face, reflected a ‘manifest disregard of the law’ and should be vacated,” a spokesperson for the firm said.

Anderson’s lawyer, Jarrod Malone of the Shumaker, Loop & Kendrick law firm, disputed the idea that the panel’s $1 million award was tied to a finding of age discrimination. Malone noted that it’s exceedingly difficult to have arbitration decisions overturned. To prevail, UBS would have to show not that the panel “got it wrong” but that it “knew the law and intentionally disregarded it.”

“If you look at the award, the $1 million is not tied to any particular claim, so it will be impossible for UBS to say it was tied to the age discrimination claim,” Malone said. “All that will happen is that UBS will lose and they will owe Mr. Anderson interest on the award on top of the award.”

UBS also seeks overturn of $95.3 award

This isn’t the only longshot attempt UBS is making in court to have a recent FINRA arbitration decision quashed. 

This spring, it filed a petition in federal court in Iowa seeking to overturn or reduce a $95.3 million FINRA arbitration award it was hit with in a case over a broker accused of inappropriately recommending a client short Tesla stock. 

A decision in that case is pending.

What led to Anderson’s firing

Anderson, now a broker at Stifel, until recently had a page on BrokerCheck saying he was fired by UBS “for violating firm policy by failing to obtain verbal authority from client in connection trades made in client’s account and failure to report customer complaint when client complained about the trades.” The firm had accused him of executing six separate buy and sell orders involving nearly $480,000 on two separate dates in early 2020 without first obtaining his client’s permission.

Only after the trades were completed did he seek the client’s approval. And Anderson sought that approval in a sneaky way, according to the dissent in the original award, by “recommending” transactions that in fact were faits accomplis. 

The client later said she was displeased with Anderson’s conduct, a complaint he failed to report to UBS. Six weeks after eventually ratifying the trades, the client moved her account to another firm, the panelist Dietrich wrote in his dissent.

Anderson’s BrokerCheck page has since been amended to state that he and his client had previously discussed the trades, which he made before getting her final sign off. He needed to complete them by a certain date to prevent her assets from moving over to a brokerage account, which would have cost her more.

His attempts to reach her before the deadline for making the trades were unsuccessful, according to his revised BrokerCheck page. Anderson “thus placed the trades in the clients best interest to avoid the client being charged additional fees. A subsequent investigation, by UBS’s outside counsel, in February 2020, confirmed in a letter to the client the trades were made in the clients best interest and in pertinent part states, ‘Please understand your financial advisor made these trades in your best interest.'”

Dietrich’s dissenting panel opinion placed great emphasis on the fact that Anderson was an “at will” employee of UBS, meaning the firm could fire him “for any reason other than those protected by statute.”

“If I had been the decision maker, I would probably not have terminated [Anderson],” Dietrich wrote in his dissent, but UBS managers were within their rights to act as they did.

An arbitration panel, Dietrich wrote, does “not have carte blanche to create a contract to which the parties have not agreed, and in doing so has displayed a manifest disregard of the law.”