Welcome to Financial Advisor IQ
Follow

Finra Hands UBS an Unusual Split Decision

October 30, 2014

In what Reuters calls “a rare move,” a Finra arbitration panel has split a decision in a dispute between a broker and his ex-employer, UBS Financial.

The U.S. securities regulator, which is funded by the firms it oversees, ordered UBS to pay broker Gary Padussis $933,000 for hurting his business. But Finra also ordered Padussis to pay UBS $1.7 million “to cover bonus funds he received when he was hired in 2009” for quitting the firm before the period governing a signing-bonus agreement was over, Reuters reports. The decision leaves the advisor owing UBS $767,000.

Securities attorney Michael Sullivan of Morristown, N.J., tells Reuters it’s “highly unusual” for an advisor to get such a big award from a former brokerage — particularly when the broker still owes bonus money to the firm in question.

As usual in arbitration cases, the Finra panel didn’t explain its decisions.

Padussis first became a broker in 1986. He joined UBS from Citigroup early in 2009 — just as Citi’s Smith Barney brokerage unit was getting set to become part of Morgan Stanley in a merger prompted by the financial crisis of 2008. He left UBS in 2013, over his employer’s decision to let one of his team members abscond to a different UBS team — a move he says resulted in his losing clients to that team, according to the Reuters report.

While the panel agreed the broker lost money because of UBS’ decision in this matter, it ruled the broker owed the brokerage some of his signing bonus because he left before an agreed period was up. As Reuters explains, “signing bonuses, often referred to as ‘employee forgivable loans,’” are sometimes paid to brokers when they’re hired. “They are structured as loans forgiven over time, typically 7 to 10 years.” The deals usually stipulate that brokers who leave before the loan period is up “must return part of the payment,” adds Reuters.

In his original counterclaim, Padussis “sought more than $10 million in damages and an accounting of clients who moved to the other team and who are still at UBS,” Reuters reports.

By Thomas Coyle
  • To read the Reuters article cited in this story, click here.