A former UBS Wealth Management Americas broker has asked a federal court judge to overturn a Finra arbitration award ordering him to repay more than $300,000 in bonus money, claiming he could no longer work there because of the way UBS marketed structured products.
Michael Hadden, who has been in the industry since 1994 and who worked at UBS from 2009 to 2011, is arguing that UBS made it “impossible” for him to continue there because of how it marketed and sold structured products to supposedly conservative investors, according to court filings in the U.S. District Court for the Western District of Kentucky. As a result, Mr. Hadden said he shouldn't have to adhere to the Finra arbitration award: a $200,000 bonus, another $100,000 in attorneys' fees and $16,000 in interest.
“UBS created an inhospitable work environment through its various unethical practices with respect to customers, employees and regulators,” he said in documents filed in his original claim filed in arbitration in December 2012. “This gave [Mr.] Hadden good cause to resign from UBS without repayment of promissory notes.”
The arbitration panel with the Financial Industry Regulatory Authority Inc. already
shot down his argument and a counterclaim for $1.3 million in damages in November, siding with UBS' initial claim seeking to claw back the bonus.
But Mr. Hadden said he wasn't given a fair shake and that the four-day session did not give him enough time to present his inhospitable work environment claims. Further, he said the panel refused to postpone a hearing to give him additional time.
Mr. Hadden, who is no longer licensed, is arguing that UBS would mislabel conservative investors “moderate” according to their risk tolerance “for the purpose of avoiding restitution and penalties,” the court filings state.
While sales literature said the structured products and some exchange-traded funds were suitable for conservative investors, brokers were not allowed to buy the products unless the client was listed as “moderate,” as that reduced their liability in lawsuits when some of the products, such as
Lehman principal protected notes, lost value, Mr. Hadden claimed.
He cited another settlement related to Lehman notes in which UBS was ordered to repay “conservative” clients 100% restitution, while “moderate” investors received 50%.
“The reality, however, is that the sales literature classification is created for one purpose, i.e., to sell the securities, while the risk-reporting system is done for another, i.e., to protect UBS from future claims of lack of suitability from the client or Finra,” Mr. Hadden said in court filings.
He also said UBS used negative consent letters, which required customers to opt out of a change, to charge high investment management fees.
UBS spokesman Gregg Rosenberg declined to comment on Mr. Hadden's complaint.
Mr. Hadden, who is representing himself, also declined to comment.
