UBS Hit with Biggest Finra Employee Arbitration Penalty of Year
A Finra arbitration panel has ordered UBS Financial Services to pay a former compliance official $11 million for defaming him in dismissal papers that alleged he failed to supervise employees executing uncovered options strategy in their and family accounts.
UBS fired former Chicago Tower market supervisory officer Mark Munizzi in April 2018, accusing him of inadequate supervision and of giving “varied responses” during its review of his activities, according to his BrokerCheck record. Munizzi asserted that he was not informed by the firm’s central supervision office of margin calls against brokers in UBS’s Madison, Wisconsin, branch until after the close of the market on February 15, 2018, when the Dow Jones average plunged 1,175 points.
“It’s a pretty extraordinary award,” said Steve Gomberg, a lawyer at Lynch Thompson LLP, who represented the former compliance official. “Punitive damage awards in Finra proceedings are ‘unicorn-rare,’ and require the arbitrators to find that UBS conduct was so abhorrent that it required punishment so severe that it deters future wrongdoing.”
The two public and one nonpublic arbitrator in Chicago also recommended that Munizzi seek expungement from Central Registration Depository records of his termination and modification of UBS’s discharge notices to say he was terminated without case.
Arbitration decisions are rarely challenged in court, but UBS suggested that it may seek to have the December 11 decision vacated.
“UBS strongly disagrees with this unfounded award, which was contrary to the substantial evidence demonstrating that UBS acted properly and consistently with regulatory expectations and its responsibilities to the industry,” a company spokeswoman said. “UBS cannot understand how the panel could have come to this conclusion. We intend to pursue all avenues to challenge the award.”
In addition to firing Munizzi, UBS terminated Madison, Wisconsin, branch manager Mark Pent and Travis Collings, a junior associate on the team of megabroker Andy Burish. Collings was held responsible for failing to close out positions that caused a $2 million loss in one team member’s account and a loss of $1.7 million in his mother’s account, according to Gomberg. (Burish, who remains at UBS, was not implicated in the incident, and Collings is not currently registered as a broker or investment adviser.)
Pent earlier this month won $200,000 of the $1.5 million of compensatory damages he had sought from UBS in a separate arbitration hearing in Milwaukee. He was not awarded punitive damages, and the arbitrators—while recommending expungement of language indicating inconsistent responses to UBS investigators—said the language on UBS’s U5 dismissal report about supervisory lapses should remain, according to his lawyer.
“I’m pleased to have it all over with,” said Pent, who now runs the Madison branch of registered investment advisory firm Annex Wealth Management. “I feel that I’ve been vindicated.”
In June 2018, UBS imposed new options trading restrictions on employees and their families, citing “several situations” when margin accounts became undercollateralized or fell into a deficit.
“We believe that they required some senior person as a scapegoat, and that they chose Munizzi and terminated him even though he had no direct involvement in the matters which led to losses,” Gomberg said. “Apparently, the panel agreed with us.”
Munizzi, who spent half of his 30-year brokerage career at UBS, has not been able to find another position since his termination, his lawyer said.
The compliance official received all the compensatory damages and attorneys’ fees requested in his June 2018 arbitration claim, and just under 24% of the $31.5 million in punitive damages that his lawyer suggested.
The arbitrators assessed all but $800 of the $30,000 of fees Finra charged for 28 hearing and prehearing sessions against UBS.The $11 million award overshadows one for $9 million that another arbitration panel made against UBS in September over charges that it “raided” brokers from Credit Suisse.