A former UBS financial advisor who alleged the firm fired and defamed him over the terms of his recruiting bonus loan won almost $1 million from the wirehouse in FINRA arbitration.
"They reneged on the payment of the contract and used all sorts of different excuses and accusations to justify them not paying," Anil Bhandari of Aren Asset Management told Financial Planning this week in his first public comments on the details of the July 14
A New York-based panel ordered UBS Financial Services to pay Bhandari nearly $909,000 in damages and fees and approved the removal of the firm's "defamatory" termination explanation from FINRA BrokerCheck after the 39-year veteran advisor accused the firm of breach of contract, wrongful termination and violations of labor laws. The firm's allegations of churning no longer appear on Bhandari's file, and he has received payment of the award, Bhandari said.
Promissory notes such as the "letter of understanding" with terms that Bhandari described as amounting to as much as $3 million to $4 million over nine years can often result in litigation when a broker and a firm part ways. The companies recruit advisors with so-called bonus loans that are promissory notes. Wealth managers forgive the loans if advisors stay with the firm for the prescribed period and meet required levels of business, but the agreements break down if a broker leaves the ranks. Besides the contractual claim, Bhandari accused the firm of defaming him on BrokerCheck. Defamation
For Bhandari, who was represented by his son Rishi Bhandari and Robert Glunt of the Mandel Bhandari law firm, the legal wrangling for four years after his October 2018 departure from the firm amounted to "a matter of principles," he said. Bhandari's practice manages over $100 million in client assets with Spire Investment Partners as its current RIA and brokerage. It had roughly $475 million in client assets when he was with his prior firm.
UBS "drummed up all these charges so that they wouldn't have to pay me," said Bhandari, whose practice will soon move to operating in Miami after decades in New York. "They were hoping that they could keep all my accounts. They didn't know I was going to fight, because most of the time, when people are 70, they retire. They give up."
The entire saga stemmed from a contention by UBS that Bhandari had fallen $8,000 short of generating around $1 million in revenue a year, he said. Rather than counting the earnings at the end of a month as spelled out by the contract, the firm claimed the period ended on what it called "the settlement date" three days earlier, according to Bhandari.
Representatives for UBS didn't respond directly to Bhandari's description of the end of his UBS tenure.
"We are disappointed with this decision," spokesman Jonathan Humphreys said in a statement.
The attempt by UBS to employ such a technicality in the promissory note strikes
Much more commonly, Kennedy has seen firms terminate brokers three weeks before the yearly forgiveness of a portion of the note in order to enforce a larger remaining balance on the loan, he said. Giant broker-dealers may fight brokers over as little as tens of thousands of dollars.
"I genuinely believe that BDs decide to 'stick to their guns' on beyond shaky ground like deeming the [registered representative] to have missed the production goal since the trades hadn't cleared on time because a very small minority of reps will follow through with the arbitration," Kennedy said. "The costs associated with correcting what I consider abuses of power by BDs are high. And most reps don't have the resources or stomach to follow through with a full-blown arbitration to right the wrongs."
In letters to senior management addressed to successively higher ranks at the wirehouse, Bhandari said he explained the terms of the contract many times before pressing the arbitration case. In addition, he believes he added to the ire of UBS management by refusing to pitch all clients on a risky alternative product and declining a colleague's request to carry out an insurance transaction Bhandari found to be exploitative toward an older customer. The company alleged he had churned five of his clients for commissions without even calling them, he said.
Bhandari fell short of his initial claim for more than $5 million in damages and a subsequent filing seeking $1.8 million, but he received a great deal of relief in the award plus the satisfaction of watching his son argue the case and listening to the supposedly harmed clients praising him.
In the unanimous decision following 10 pre-hearing conferences and 20 hearing sessions last spring, the arbitrators ordered UBS to pay compensatory and liquidated damages, interest, attorney fees and a nonrefundable filing fee Bhandari had paid to FINRA. The panel assessed $62,000 in damages for breach of contract, another $62,000 under New York employee wage laws, $234,000 for "lost income as a result of wrongful termination" and another $431,000 for missing pay. They also allotted $120,000 in attorney fees and approved the expungement of Bhandari's record, with a change describing his departure from the firm as voluntary.
"The panel recommends expungement based on the defamatory nature of the information," according to the decision.
During his four decades in the industry, Bhandari has grown familiar with arbitrations after having three customer complaints denied and another closed with no action, according to BrokerCheck. The file includes a 2013 settlement with a client for $23,000 and a voluntary resignation from Morgan Stanley two years later. The company cited an incomplete social media post that was never published and another advisor's customer who turned into Bhandari's client without any notification of the investor's earlier request to liquidate hedge fund holdings, according to Bhandari. Morgan Stanley settled the case to avoid litigation costs, he said.
"That's why I was so prepared, because I said, 'I don't want to be the broker of record again and face something like this," Bhandari said. At 75 years old, he's going to keep working full-time as an advisor "until my last day" because "I love what I do," he added.
