UBS And Merrill Lynch Win $2.5 Million DotCom Customer Case

February 11, 2013


Time ran out on one public customer's arbitration claims

In a Financial Industry Regulatory Authority ("FINRA") Arbitration Statement of Claim filed in March 2012, public customer Claimant Kaiser asserted various causes of action including breach of contract, breach of fiduciary duty, failure to supervise, negligence, and unsuitability in connection with his purchase of stock. Claimant Kaiser sought $2,850,000 in compensatory damages, punitive damages, interest, attorneys' fees, and other relief. In the Matter of the FINRA Arbitration Between Gerald Kaiser, Claimant, vs. Gregory Alan Berger, Merrill Lynch Pierce Fenner & Smith Inc., and UBS Financial Services Inc., Respondents (FINRA Arbitration 12-01158, February 6, 2012).

Respondents generally denied the allegations and asserted various affirmative defenses.

Motion To Dismiss

Following oral argument, on October 24, 2012, the FINRA Arbitration Panel granted the Respondents' Motion to Dismiss. In offering their rationale, the Panel explained the following in the Arbitration Decision:

The Panel assumed in the light most favorable to the Claimant that the latest date on which Claimant could have had notice of his loss was September 27 2005, the date - the subject investment - filed for bankruptcy. Based on that date, the matter was not eligible for arbitration on March 22, 2012, when the claim was filed with FINRA pursuant to 12206(a) of the Code of Arbitration Procedure for Customer Disputes. This decision is without prejudice to any remedies Claimant may have in the Federal or New York Courts.


After granting the Motion to Dismiss, the panel conducted a telephonic expungement hearing concerning the disclosure of the arbitration on Respondent Berger's Central Registartion Depository file ("CRD"). Claimant did not appear at the expungement hearing.

The FINRA Arbitration Panel dismissed Claimant's claim with prejudice; however, the decision was without prejudice to any remedies Claimant may have in the Federal or New York Courts. The Panel recommended the expungement of references to the arbitration from Respondent Berger's CRD, explaining that:

[T]the uncontested evidence presented at the expungement hearing was that Berger did not sell of stock to the Claimant The evidence did reflect that Claimant invested directly with the company without consulting Berger and purchased stock. Also, Berger did not earn any commission for this transaction.

Bill Singers Comment

FINRA's Rule 12206 (also known as the "Eligibility Rule") provides that no claim shall be eligible for submission to arbitration under the Code where six years have elapsed from the occurrence or event giving rise to the claim. The determination of whether FINRA's Eligibility Rule applies is left for the FINRA Arbitration Panel. The six-year eligibility rule is not a statute of limitations and not subject to tolling; and the period runs from the date of the transaction giving rise to the claim, not from the date of discovery of the alleged claims.

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