Fired UBS Broker’s $2.4 Million NASD Arbitration Award is Upheld

A $2.4 million NASD Arbitration Award to a former UBS financial adviser, who was fired in 2003 by the company that preceded UBS PaineWebber Inc. is being upheld by the U.S. District Court for the Western District of North Carolina. The court said that it did not agree with UBS’s theory that the arbitration award did not honor provisions made in the arbitration contract or that it was in manifest disregard of the law.

Former financial adviser W. Van Pelt Jr. had served as a financial advisor UBS and its predecessor JC Bradford from 1999-2003. Upon his hiring, he filled out a Form U-4 industry form in which he agreed to not hold UBS liable if it provided specific information, including notice of termination.

He was let go in January 2003 during an internal probe. UBS filed a U-5 form reporting Van Pelt’s termination because of “concerns of conduct” in a matter involving a customer transaction. On the form, UBS said that Van Pelt was not under investigation because the probe was already over at that time.

Van Pelt started NASD arbitration proceedings soon after. He cited defamation, breach of fiduciary duties, and negligence among the tort claims that he cited. An arbitration panel ruled against UBS in 2005. The firm was ordered to pay the former UBS broker $2.4 million in compensatory damages and $16,579 million for expert witnesses.

The panel said that the Form-5 that UBS filled out included defamatory language in its explanation of Van Pelt’s firing and suggested that UBS revise the wording. The panel asked UBS to submit an amended form stating that Van Pelt was being investigated and to provide details of the probe.

In affirming Van Pelt’s award, the court said that even though Form U-4 did release UBS from liability regarding information it included on Form U-5, UBS could easily be held liable based on Van Pelt’s other claims, which included conversion, interference with contractual relations, or breach of duty of good faith and fair dealing.

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United States District Court, Western District of North Carolina

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