UBS Broker Wins $400,000 from Ex-Partner in Slander Case

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A top Morgan Stanley broker in California who allegedly slandered a UBS Financial Services broker and his family in an attempt to damage his former partner’s practice servicing investors with concentrated private security positions has been ordered to pay at least $400,000 in compensatory and punitive damages.

The award is unusual in that UBS broker Michael W. Sexton won not only $300,000 of compensatory damages (plus 10% annual interest until the damages are paid in full) but also $100,000 in civil punitive damages.

Similarly surprising, according to lawyers, was the three-person arbitration panel’s decision to permanently enjoin and restrain Morgan Stanley broker Brett G. Grimes from making any false and disparaging comments, written or verbal, of any kind regarding Sexton and his family.

“The panel determined that Grimes’ false and disparaging statements are not protected by the First Amendment,” wrote the panel, which was composed of two public arbitrators who are lawyers and one who is not but who works in the financial services industry. As is customary, they did not explain the facts of the case or whether their statement indicates that free speech was at the core of Grimes’ defense.

Sexton claimed that his former partner and Morgan Stanley intentionally interfered with his business and economic relations, libeled him, intentionally inflicted emotional distress on him and his family, and besmirched his reputation. He updated his claim during the course of the 17-month proceeding with a claim of slander.

Neither Sexton nor Grimes, who have been registered reps for 32 and 33 years respectively, responded to requests for comment, and the award decision did not elaborate on factual details of the dispute.

Grimes ranked among Barron’s top 100 advisors in California in 2015 and 2016, managing $12.4 billion of customer assets in the 2016 ranking. Sexton is a senior vice president running Private Equity Services Group, a team that his website says includes four brokers and two associates.

The pair worked together at UBS on a team focusing on entrepreneurs and venture capitalists with large portfolios of Rule 144 restricted and privately traded securities, said John D. Singer, a lawyer who represented Sexton.  

He would not discuss the duration of their relationship, but the brokers crossed paths at UBS’s Santa Barbara office between 1990 and 2008, according to their BrokerCheck histories, and again at Morgan Stanley from 2008 until Sexton left in 2011 to return to UBS. Sexton did not file his claim until July 2016.

“Mr. Sexton, after a long battle, feels vindicated that the panel granted the various bases for relief that he was seeking,” said Singer, who did not ask for specific damages in the case but noted that punitive damages and injunctions are “certainly aberrational” in Finra arbitrations. “In terms of the award, we feel the panel embraced our claims.”

Sexton settled his claim of vicarious liability against Morgan Stanley in November, according to Singer, who declined to discuss the settlement amount.

Finra’s arbitration rules did not permit the panel to consider Sexton’s request for attorney’s fees because Grimes and Morgan Stanley did not counterclaim for fees and because the award was not statutorily required until the causes of action cited, according to Singer.

Arbitraton panel chairman Arthur Berggren said his “responsibilities with Finra” prohibited him from discussing the case, and his fellow arbitrators did not respond to requests for comment.

Kevin K. Fitzgerald, the lawyer who represented Grimes, did not respond to a request for comment.