UBS Financial Services is on the hook for $737,000 in damages and costs after an investor claimed in a FINRA arbitration complaint that the firm had bungled its handling of Tesla stock.
The three-person arbitration panel did not give any reasoning for their award, which is customary in most such decisions.
The award to the investor, which was issued Thursday, is the second time this year that UBS has suffered a loss in the industry’s private arbitration forum involving Tesla shares.
At the end of February, a three-person FINRA arbitration panel stunned the US wealth management arm of the giant Swiss bank when it awarded $92.2 million in damages to a group of nine investors who alleged the firm engaged in a high-risk trading strategy linked to a financial advisor shorting shares of Tesla.
A month later, UBS in federal court in Iowa filed its motion to vacate that award, one of the largest against a retail securities firm in recent memory. UBS’ motion has yet to be decided.
In this current case, the client’s UBS financial advisor mishandled an options strategy called a collar, according to Robert W. Pearce, a plaintiff’s attorney.
The client who sued UBS, Sean Barni, had worked as an executive for Tesla for more than seven years and wanted the options strategy applied to his shares, according to Pearce. UBS moved most of Barni’s assets to a fee-based account and did not put the options collar on the Tesla shares, he added.
“The concentrated position of Tesla stock could not be put in the managed portfolio,” Pearce said.
A spokesperson for UBS declined to comment.
In his complaint, Barni alleged violations of California securities laws, negligence, fraudulent concealment, and other charges.
The two investor arbitration losses for UBS are distinct and separate, although they both stem from clients’ holdings of Tesla shares. The award this week was based on a strategy known as an options collar, while the giant award from February was related to short selling.
The three-person FINRA panel divided Barni’s award into four major categories to be paid by UBS: $388,000 in compensatory damages; $96,000 in interest; $87,000 in costs; and $193,000 in legal fees. The hearing was held in San Francisco.
UBS has a history of costly litigation stemming from the sale of volatile investment products, from its YES options strategy to UBS-managed and underwritten Puerto Rico bonds and bond funds to Lehman Brothers structured notes, which collapsed when the investment bank in 2008 declared bankruptcy.
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