UBS wins $4.5M clawback case against 2 advisers
Two former UBS advisers not only lost their arbitration case against the firm last week, which they accused of hiring them under false pretenses, but they now owe UBS more than $4.5 million for alleged breach of promissory notes.
The dispute between Thomas Fayad and Michael Zirpolo and UBS, which has its origins in 2012 when they joined the firm from Morgan Stanley, centered on whether the advisers were given a proper chance to build their book.
"We think UBS treated them unfairly and the panel failed to recognize the evidence … that they were denied the opportunity to conduct business," Ethan Brecher, a New York-based attorney representing the advisers, says.
A spokeswoman for UBS said the wirehouse "is pleased with the decision which fully vindicated the firm's position."
When UBS was recruiting them, it neglected to inform the duo of critical firm policies that were later to pose obstacles in transitioning their business over, Brecher says.
For example, Fayad and Zirpolo did a large amount of transactional and syndicate business, according to Brecher. UBS clients who want to engage in syndicate preferred business would need to meet certain requirements, such as keeping a minimum of $1 million in their accounts, which some of Fayad and Zirpolo's clients were not willing or able to do.
In addition, their largest client wasn't able to transition over to UBS, further hurting Fayad and Zirpolo's production, Brecher says.
Ameriprise lost several arbitration cases in attempt to claw back more than $800,000 in stock awards the firm gave to two former employees.
They tried replacing this with a new institutional client, but UBS allegedly nixed the idea without sufficient explanation, Brecher says.
"They basically lost out on $3 million in income because UBS would not allow them to conduct this business," the attorney says.
After about three years at UBS, the team left to join Oppenheimer in 2015. By the end of the year, both sides had filed claims against one another, according to arbitration records.
Brecher says that an additional issue arose during the FINRA arbitration process: whether the electronic promissory notes they signed were the actual ones presented during arbitration.
"They were supposed to upload a particular promissory note, and we don't know if that was the right document," he says.
UBS rejected all the advisers' claims and sought damages of its own for breach of promissory notes.
The panel of three arbitrators sided entirely with the firm, and in addition to damages for the notes, ordered the advisers to pay about $61,000 in interest and $43,000 in attorneys' fees. As is customary, the panel did not explain its ruling.