Ex-UBS Broker Loses Bid to Avoid Paying Notes Balances
A former UBS broker who challenged an order to pay the balance on loans he received during his six-and-a-half years at the firm lost his attempt this week to vacate the arbitration award.
The Connecticut broker, now with TD Private Client Wealth, alleged that two of the three Finra arbitrators ordering the award failed to disclose pertinent information prior to the arbitration hearing and that one may have been prejudiced because he or a family member once owned UBS-issued securities. The actions invalidate their appointments to preside in Finra forums and put Miller, retrospectively, at a disadvantage when ranking his arbitrator preferences, he argued.
“[T]he first two allegedly deficient disclosures identified are not suggestive of any bias,” U.S. District Judge J. Paul Oetken of the Southern District of New York wrote in the May 6 ruling, referencing one arbitrator’s failure to say she has represented investors in her solo law practice and another’s omission of his having been a defendant in a federal lawsuit.
The stock-ownership objection was invalid because Miller did not object when the arbitrator disclosed the holdings a year before hearings began, the judge ruled.
Courts rarely vacate arbitration decisions, and Monday’s ruling further underscores the deference they give to the arbitration process. Underlying facts cannot be retried, and the Federal Arbitration Act essentially limits vacate orders to showings of fraud, corruption or egregious procedural conduct by arbitrators or sponsors of arbitration forums.
Credit Suisse last month lost an attempt to overturn an arbitration award of almost $1 million to a broker now with UBS. Credit Suisse argued, in part, that arbitrators exceeded their powers by refusing to postpone a hearing to allow the former head of its U.S. broker-dealer business to testify.
Several employment attorneys have attempted to overturn arbitration decisions against brokers in the past year, citing arbitrators’ alleged deficient assessments of evidence and misclassification of themselves as public rather than industry representatives, among other deficiencies. They also have said that Finra committed procedural errors, including sending notice of arbitration claims firms filed against brokers to the wrong address.
Few, if any, of the vacate claims brought on behalf of brokers in the past year have been successful.
“I’ve stopped bringing them,” said Joshua Brinen, a New York City lawyer who filed a handful of cases in the past 18 months, none of which has succeeded. “The process can help keep their licenses intact for a year or so, and it’s worth it to work toward settlements, but you don’t want to be the guy who always loses. The process is really tough.”
Miller, who worked at a UBS office in Hartford from February 2010 to August 2016, received six “forgivable” loans for a total of $301,052, according to Monday’s decision.
UBS in December 2016 filed its claim for the $104,000 note balance that it said came due when he left for TD Private Client Wealth. Miller unsuccessfully counterclaimed, saying the notes were secured from him “under duress” and accusing UBS of redefining his “anticipated bonuses as loans without his informed consent.”
The broker could not be reached.
Bradley Schnur, his Long Island, N.Y.-based lawyer, declined to immediately comment, saying he had not yet discussed the decision with Miller.