Former UBS Broker Wins Reduction in Note Balance Owed
An arbitration panel in Chicago has rendered an unusual decision in which a former UBS Financial Services advisor was ordered to pay the firm compensatory damages that were $150,000 lower than the balance on promissory notes the firm said he owed.
The decision, posted by the Financial Industry Regulatory Authority last week, ordered Marc Horner to pay UBS $328,161, despite the firm’s counterclaim for $505,411 plus accrued interest that it alleged he owed on four notes.
The arbitrators also granted Horner $27,250 of his claim, which alleged “misrepresentation, conversion” and state wage law violations. He had sought more than $500,000 in compensatory damages and cancellation of the notes.
The arbitrators, as is customary, did not explain their decisions. They denied both parties’ requests for attorneys’ fees and the advisor’s for punitive damages.
Horner, who joined UBS from Merrill Lynch in November 2008 and resigned just over six years later to affiliate as an independent broker with Triad Advisors in Oak Brook, Il, did not return a call for comment.
“I think it’s a significant decision,” said Laurence Landsman, Horner’s Chicago-based lawyer, “because the financial advisor received an award and the principal balance on the notes has been reduced by about one-third.”
A UBS spokesman did not reply to a request for comment on his remarks or on the award.
Landsman said his arguments centered on UBS’s monthly deductions of interest from Horner’s commission checks while applying the payments only annually to reduce his principal balance violated the Illinois Wage Payment and Collection Act. The law assesses penalties for each month that wages are not paid, Landsman said.
Horner was a “decent producer” but the deductions from his commission checks contributed to his taking home zero pay in 21 out of the first 24 months he was with UBS, according to his lawyer.
The advisor’s initial arbitration claim, filed in February 2015, sought “an accounting to determine why his payout…was so low” as well as compensatory damages, punitive damages and 2% interest per month “on all withheld transition payment overages,” in accordance with the state wage law.
Landsman said the allegations never involved claims over his client’s grid-based payments. Horner, however, claimed that UBS failed to credit almost $25,000 of the deductions against his note balance, an amount close to the compensatory damage award from the arbitrators.
Alan Wolper, a Chicago-based financial services lawyer at Ulmer & Berne, said the arguments and the decision are perplexing since firms do not typically ding advisors on “forgivable loans” against which promissory notes are written. “It would be odd for someone to receive zero compensation because these advance compensation agreements, or forgivable loans, are made to be on top of what the advisor makes in production.”
He and Landsman also said that citation of the Illinois wage law appears to be a unique argument in broker cases against firms in the state.