Last week, a panel of FINRA arbitrators ordered UBS Financial Services Inc. to pay over $11 million to a former supervisor, including $7.5 million in punitive damages, for defaming him on his Form U5 and thus preventing him from obtaining alternative employment.
Mark Munizzi worked as market-operations supervisor in UBS’s Chicago office. In February 2018, the market dropped sharply, and two accounts Munizzi oversaw lost significant value. UBS fired Munizzi in April of that year. UBS asserted that Munizzi had failed to respond to a notification of margin calls on the two accounts; Munizzi said he was provided no such notification. UBS also said that Munizzi had failed to properly supervise the risks of an uncovered options strategy and lied during an internal review of the incident.
Munizzi sued UBS, alleging that his former employer defamed him in describing his termination on his Form U5–thereby preventing him from finding a new job in the industry–and failed to pay him all monies owed.
The panel found that UBS had defamed him in completing his U5. The panel ordered that UBS amend Munizzi’s U5 to indicate that he was terminated without cause, expunge the Reason for Termination provided by UBS, and expunge the “Yes” answers to Disclosure Questions regarding internal reviews and termination.
The panel further awarded Munizzi: $3,149,656 in compensatory damages; 5% interest on $112,500 of that amount, which the panel found to comprise severance pay, through the date of payment; $7,500,000 in punitive damages; $496,753.36 in attorneys’ fees; $24,381.50 in costs; and his $375 filing fee.
UBS has indicated that it will challenge the award.
Earlier this year, Shustak Reynolds & Partners represented two brokers in a similar suit for wrongful termination, breach of contract, and defamation against USAA Financial Advisors. A FINRA panel ordered USAA to pay its former employees $1.8 million, including $700,000 in punitive damages, and to change the reason for termination on each broker’s Form U5 to “voluntary.”
These cases show that FINRA takes very seriously the defamation of FINRA-registered brokers and investment advisors.
Shustak Reynolds & Partners, P.C. has extensive experience representing brokers and financial advisors in recruitment, employment, and wrongful-termination disputes, promissory-note claims, and FINRA arbitrations and regulatory proceedings. Contact us today for a complimentary consultation.
Shustak Reynolds & Partners, P.C. focuses its practice on securities and financial services law and complex business disputes. We represent many broker-dealers, registered representatives, investment advisors, investors and businesses. Attorney Kara Siegel can be reached in the firm’s San Diego office at (619) 696-9500.
Last week, a FINRA arbitration panel took the extraordinary step of ordering the parties to an arbitration to request dissolution of a temporary restraining order (TRO) imposed by a district judge in Nevada.
On November 12, 2019, Edward Jones had secured a TRO and injunction preventing former broker Mike Peterson from contacting his former clients. Edward Jones argued that after running the company’s Henderson, Nevada office for 13 years, Peterson had decamped for rival Ameriprise, contacted at least 11 former customers using Edward Jones’s confidential client data, and sent transfer paperwork to at least 15 former customers. Indeed, Edward Jones alleged that shortly after joining Ameriprise, Peterson had moved as much as $15 million dollars from 11 former Edward Jones clients. Peterson denies the allegations.
The district court’s granting of the TRO permitted an expedited hearing schedule from FINRA. And last week, the FINRA arbitration panel ordered the parties to request that the district court dismiss the TRO.
The drastic move may indicate that the panel was unimpressed with the evidence Edward Jones had presented to the district court. Peterson’s lawyers argue that he merely informed some clients of his move, consistent with industry practice.
The panel’s order may also signal the panel’s displeasure with Edward Jones’s many recent actions against former brokers. The firm is not a member of the Protocol for Broker Recruiting, and in the past year, it has aggressively pursued several brokers who left the firm for rivals–and even one who left to start her own practice. The federal judge in that case found that Edward Jones encourages recruits to send former clients affiliation announcements akin to those it challenged in the lawsuit.
Shustak Reynolds & Partners, P.C. has extensive experience representing brokers and financial advisors in recruitment, employment, and wrongful-termination disputes, promissory-note claims, and FINRA arbitrations and regulatory proceedings. Contact us today for a complimentary consultation.
Shustak Reynolds & Partners, P.C. focuses its practice on securities and financial services law and complex business disputes. We represent many broker-dealers, registered representatives, investment advisors, investors and businesses. Attorney Kara Siegel can be reached in the firm’s San Diego office at (619) 696-9500.
In June 2019, the SEC adopted a new rule under the Securities and Exchange Act of 1934 requiring broker-dealers and their representatives to act solely in the “best interest” of their retail clients when making investment recommendations. The so-called “Regulation Best Interest,” or “Reg BI” imposes a new standard of conduct on broker-dealers and their registered representatives beyond the existing suitability obligations and, according to the SEC, will align the expected standard of conduct with retail customers’ reasonable expectation that the financial professionals with whom they work will, in fact, act in their best interest. In addition, Reg BI will impose new conflicts of interest rules and require broker-dealers to establish, maintain and enforce policies reasonably designed to identify and fully and fairly disclose any conflicts of interest to investors. The SEC adopted the rule on September 10th, 2019, and broker-dealers must comply fully by June 30th, 2020.
Under Reg BI, when making an investment recommendation the broker-dealer must comply with four specific obligations: (1) provide disclosure before or at the time of the recommendation about the relationship between the retail customer and the broker-dealer; (2) exercise reasonable diligence, care and skill in making the recommendation; (3) establish, maintain and enforce policies and procedures reasonably designed to address conflicts of interest; and (4) establish, maintain and enforce policies and procedures reasonably designed to achieve compliance with Reg BI. More information on the specific requirements of Reg BI is available here.
Shustak Reynolds & Partners, P.C. focuses its practice on securities and financial services law and complex business disputes. We represent many broker-dealers, registered representatives, investment advisors, investors and businesses. Partner George C. Miller can be reached in the firm’s San Diego office at (619) 696-9500.
