Credit Suisse Wins $9 Million in UBS Raiding Case
(Updated with asset and production numbers of brokers UBS hired, in ninth paragraph.)
A Finra arbitration panel on Tuesday ordered UBS AG’s U.S. brokerage unit to pay Credit Suisse $9 million to resolve a “raiding” claim.
The rare claim was filed in December 2015 after Credit Suisse announced two months earlier that it was shuttering its U.S. brokerage operations and encouraging its brokers to join Wells Fargo Advisors.
UBS responded to the announcement with an aggressive recruiting push, hiring just over 100 of Credit Suisse’s 336 brokers, second only to the 111 who joined Wells Fargo, according to a document reviewed by AdvisorHub.
Tuesday’s arbitration decision, delivered unanimously by three non-public arbitrators, follows a spate of million-dollar awards to brokers who claimed that Credit Suisse owed them deferred compensation withheld when they joined firms other than Wells Fargo.
“It’s a significant award,” said Rogge Dunn, an employment lawyer in Texas who is representing some former Credit Suisse brokers with outstanding arbitration claims, and who had been doubtful that the raiding claim would succeed. “There’s no doubt it’s a victory for Credit Suisse.”
Credit Suisse estimated in its Finra raiding complaint that total damages—including punitive damages—would be “far in excess” of $10 million. It cited “unfair competition and raiding,” and accused UBS of aiding and abetting its former brokers’ breaches of fiduciary duty and misappropriation of trade secrets.
UBS counterclaimed for an unspecified amount of punitive damages, costs and attorneys’ fees. Credit Suisse breached the Protocol for Broker Recruiting and Finra’s Rule 2010, which requires firms to abide by high standards of commercial honor and just and equitable principles of trade, UBS asserted.
The arbitrators—Susan Harkins, Leonard Bakal and Margaret E. Nelson—did not explain their award but denied UBS’s counterclaims and all claims for punitive damages and attorneys’ fees. They ordered the two Swiss banks to split Finra’s $151,500 bill for the 101 hearing and pre-hearing sessions held between January 2018 and September 2019.
In spite of the award’s size, it is likely that UBS considers it a mere “transactional cost” in the context of revenue it is likely booking from the former Credit Suisse brokers, Dunn said. They were overseeing about $36 billion of customer assets at their former firm and generating $208 million of annual fees and commissions, said a person familiar with their practices.
“UBS believes that this is a bad decision that is out of line with the applicable law,” company spokesman Peter Stack said in an e-mail. “While we don’t believe any award was justified, UBS notes that the Claimant received only a fraction of what it sought.”
Credit Suisse spokesman Jonathan Schwartzberg said the decision confirms the bank’s view that UBS engaged in serious misconduct.
“Credit Suisse is pleased that the Panel took the time to carefully review the considerable evidence of UBS’s misconduct and issue an award of $9 million in Credit Suisse’s favor, denying UBS’s counterclaims for frivolous litigation in their entirety.”
Dunn said the decision was unlikely to affect the scores of pending arbitration cases from brokers suing Credit Suisse for their deferred compensation.
UBS’s Stack declined to comment on whether UBS will seek to overturn the decision.
Courts give strong deference to the arbitration process and rarely grant petitions to vacate. Credit Suisse, however, has filed to vacate at least three deferred compensation awards made to brokers in recent months totaling almost $11 million.