A FINRA arbitration panel has ordered UBS Financial Services Inc. to pay a staggering $92.2 million in damages to a group of nine investors who suffered losses due to a high-risk trading strategy involving Tesla Inc. stock. The ruling, which includes a massive punitive damages component, highlights significant concerns regarding broker conduct and firm-level supervision.
If you or someone you know has suffered significant investment losses working with UBS Financial Services or another brokerage firm, don’t hesitate to reach out to Meyer Wilson Werning today. Our attorneys are experienced in securities fraud cases and will help to guide you through the process with a free consultation to determine whether your losses are the result of actionable misconduct.
What Are the Allegations Behind the UBS Tesla Arbitration?
The dispute centers on a group of investors—including the Hansen, Nelson, and Valentini families, as well as Mark Kramer—who filed a claim in 2021 against UBS and one of its veteran financial advisors. The claimants alleged that from September 2019 to July 2020, their advisor recommended an unsuitable and risky strategy of selling Tesla Inc. stock short.
Short selling is a speculative strategy that bets on a stock’s price declining. However, when the stock price rises instead, losses can be unlimited.
Important Points Regarding the Allegations
The investors raised several serious accusations against the firm and the advisor:
- Unsuitable Recommendations: Clients alleged the advisor recommended they continue to hold short positions even in the face of “mounting losses”.
- Fraudulent Omission: The clients later added a fraud claim, alleging the advisor failed to disclose that he had stopped shorting Tesla in his own personal account between July 2019 and June 2020, even while recommending the strategy to them.
- Supervisory Failures: The sheer size of the punitive damages suggests the panel found that UBS management failed to properly supervise the trading activity.
The advisor, Andrew D. Burish (CRD#: 1111163), “adamantly” denied the allegations, stating that the claimants made well-informed decisions independent of his personal trading.
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How Were the UBS Financial Services Tesla Arbitration Damages Calculated?
The $92.2 million award is notable not just for its total size, but for how the damages were apportioned between the firm and the individual advisor. The panel, citing Iowa state codes, levied heavy punitive damages, which are typically used to punish defendants for harmful behavior and deter future misconduct.
The breakdown of the financial penalties is as follows:
- Punitive Damages Against UBS: The panel found UBS Financial Services liable for $69.1 million in punitive damages, representing 75% of the total award.
- Compensatory Damages Against UBS: The firm is liable for $23.1 million to compensate the customers for their actual losses.
- Damages Against Andrew Burish: The advisor was found personally liable for $5 million total—comprised of $4.5 million in compensatory damages and $500,000 in punitive damages.
Legal experts have noted that awards in the multi-million dollar range often signal that arbitrators are looking beyond the specific advisor to address what management knew and when they knew it.
What Is the History of UBS USA LLC and Regulatory Disputes?
This UBS Tesla case is not the first time the firm has faced costly litigation regarding volatile investment products. UBS has a history of disputes stemming from the sale of complex or high-risk products, including its YES options strategy, Puerto Rico bonds, and Lehman Brothers structured notes.
In response to this specific arbitration award, a UBS spokesperson stated that the firm disagreed with the decision. The firm argued that the investors were experienced and had used the aggressive shorting strategy profitably for years before complaining about losses. UBS intends to seek judicial review to challenge the award, arguing the punitive damages are inconsistent with the facts and the law.
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How Meyer Wilson Werning Helps Victims of Broker Misconduct
The UBS Financial Services Tesla arbitration damages send a powerful message that brokerage firms must ensure their investment strategies are suitable and their advisors are properly supervised. When firms prioritize aggressive trading over client protection, the financial consequences for investors can be devastating.
At Meyer Wilson Werning, we represent investors who have lost money due to unsuitable recommendations, fraud, or negligence by financial advisors. Our team has the experience and resources to take on major brokerage firms and pursue the compensation you deserve.
If you suffered losses due to the actions of Andrew Burish, UBS, or another financial advisor, contact us today for a free consultation.
Frequently Asked Questions
Why did the arbitration panel award punitive damages against UBS?
The panel awarded $69.1 million in punitive damages against UBS to punish the firm for its conduct. Punitive damages are distinct from compensatory damages (which cover actual losses) and are typically awarded when a panel finds behavior that warrants a strong deterrent message.
Who is Andrew Burish?
Andrew D. Burish is a veteran financial advisor based in Madison, Wisconsin, who has worked at UBS and its predecessors since 1984. He was named in the arbitration regarding the Tesla short-selling strategy and was found liable for $5 million in damages.
What was the trading strategy involved in the UBS lawsuit?
The case involved a strategy of selling Tesla Inc. stock short. Short selling involves betting that a stock’s price will go down; however, because stock prices can rise indefinitely, the risk of loss in a short position is theoretically unlimited.
Can I recover losses if my advisor recommended unsuitable trades?
Yes. Financial advisors have a duty to recommend investments that align with your risk tolerance and financial goals. If an advisor recommends an unsuitable strategy—like aggressive short selling—or fails to disclose material facts, you may be able to recover losses through arbitration.
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