Swiss financial wirehouse UBS is seeking to vacate a Financial Industry Regulatory Authority (FINRA) ruling and $18.5 million award on the basis that two out of three arbitrators on the case were not impartial. UBS claims that one of the clients involved in the case went against their financial recommendations, a decision leading to substantial losses. However, the crux of USB’s case to overturn the award is their assertion that arbitrators failed to disclose concerning personal and professional financial details prior to their involvement in the case.
The case was initially decided in favor of the plaintiffs, a married couple, who won damages based on UBS sale of closed-end funds of Puerto Rican bonds, claiming unsuitability and breach of fiduciary duty. The claimants also accuse UBS of violating Puerto Rico’s own financial statutes. The couple initiated their arbitration a year after the Puerto Rican bond market collapsed. They allege that UBS misled clients about the potential vulnerability of their investments, while artificially inflating the local demand for bonds.
A FINRA three-member arbitration panel found that UBS failed in their obligation to these clients. FINRA is a not-for-profit organization dedicated to ensuring the integrity of broker-dealer industry and protecting investors. FINRA is not a part of the government, but is authorized by Congress. FINRA supervises more than 635,000 brokers and 3,900 securities firms.
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