UBS Sues Fired Broker Who Didn’t Pay Arbitration Award
In a case that illustrates the difficulties that can arise in collecting arbitration awards and the risk of hiring advisors with checkered records, UBS Financial Services on Thursday sued a Florida broker for allegedly failing to pay $889,000 it was awarded in an arbitration decision a year ago.
David Fagenson failed to repay the $880,143 balance an arbitration panel ruled in October 2017 that he owed on nine promissory notes, according to a petition to confirm and compel payment that UBS filed in U.S. District Court in the Southern District of Florida. The award also included almost $9,000 in legal and filing fees.
UBS dismissed Fagenson, a 31-year industry veteran, in September 2016 for improper use of discretion in managing customer accounts, and other violations, while he was under heightened supervision, according to BrokerCheck.
Fagenson, currently an independent broker with Newbridge Securities Corp. in Boca Raton, did not respond to UBS’s arbitration claims, nor hire a lawyer to represent him, according to the arbitration award summary. He did not return a call for comment about UBS’s allegations.
The court filing is a “last-resort remedy” for firms, and highlights the importance of due diligence when hiring brokers, said David Harmon, a New York-based employment lawyer with Norris Mclaughlin, who was not involved in the case.
“They took a chance on him and it didn’t prove to be a good one,” said Harmon of the firm’s compliance risk assessment.
When Fagenson was hired in September 2010 from Merrill Lynch, he had accrued five customer complaints, four of which had settled for amounts equal to or higher than the damages requested, according to his BrokerCheck history. The broker had earlier in his career worked for seven years at UBS predecessor firm PaineWebber.
Fagenson was also once convicted on a felony charge for cultivating marijuana, a charge that was reduced to a misdemeanor.
In 2011, he was twice sanctioned by Florida regulators for failing to disclose the marijuana charge, though he said that he followed compliance officials advice regarding disclosure, and subsequently faced two other customer complaints for unsuitable and unauthorized investments. One settled for $35,000 and other other for $112,000, significantly below the $3.3 million requested.
UBS paid Fagenson $1,952,000 in nine forgivable loans for which he signed promissory notes over his six years at the firm, according to this week’s court filing. The complaint did not disclose Fagenson’s production history.
UBS fired Fagenson for violating firm policy regarding exercise of “time and price discretion, texting with clients and engaging in short term trading of preferred shares” while under heightened supervision, according to BrokerCheck.
A spokesman at UBS did not return a request for comment.
UBS’s 2017 compensation plan includes an “error grid reduction policy” that allows it to deduct grid-rate payments for problematic brokers or flatly eliminate bonuses, according to a copy of the plan reviewed by AdvisorHub.
Since leaving UBS, Fagenson has accumulated three additional customer complaints, two alleging overcharging and one alleging unauthorized trades. Two complaints are pending and one was denied, according to BrokerCheck.
A spokesman at Newbridge Securities, which Fagenson affiliated with in December 2016, did not return a request for comment.