Dissenting FINRA Arbitrator Cries Out for Fairness After UBS Victory

June 13, 2017

Consider a recent FINRA Arbitration Decision in which the investing public and industry are treated as mushrooms: kept in the dark and fed . . . ummm . . . fed . . . okay, I'll clean it up . . . fed "crap." It seems that an employment dispute arose between UBS and a former employee, who sued the firm and sought about $182,000 in damages plus costs and fees. Two of the three FINRA arbitrators found for UBS.

What was the dispute about? Oh, the Claimant and Respondent may have had some kind of disagreement or not or possibly or possibly not. Why did two of the three arbitrators dismiss the employee's claim? Because they said so. How come? They don't share their rationale with us.

All of which explains why I am fed up with the lack of any substantive progress by FINRA to redress long-simmering issues that scream out for reform. Endless Notices seeking comment, endless subcommittees and blue-ribbon panels, endless white papers and reports are not chipping away at the massive glacier of inappropriate industry special interest and privilege. What doesn't stop is that investors and industry employees -- real life, flesh-and-blood men and women -- continue to get chewed up and spit out by an unfair mandatory arbitration system maintained by a non-responsive self-regulatory organization. Consider today's featured case.

Case In Point

In a Financial Industry Regulatory Authority ("FINRA") Arbitration Statement of Claim filed in May 2016, Claimant Barron asserted breaches of contract, implied contract, and the covenant of good faith and fair dealing; unjust enrichment; promissory estoppel, and violation of New York Labor Law. Ultimately, Claimant Barron sought $181,938.06 in compensatory damages plus interest, damages pursuant to New York Labor Law, liquidated damages, punitive damages, attorneys' fees, and costs.  In the Matter of the FINRA Arbitration Between Miguel Barron, Claimant, vs. UBS Financial Services Inc., Respondent (FINRA Arbitration 16-00207, May 19, 2017).

Respondent UBS generally denied the allegations and asserted various affirmative defenses.

Majority Decision

By a majority vote of the two public arbitrators against the vote of the sole non-public arbitrator, the FINRA Arbitration Panel denied Claimant's claims in their entirety but found Respondent UBS liable for and ordered it to Claimant $300.00 as reimbursement for the non-refundable filing fee.



I respectfully dissent from the majority decision and would find for Claimant Miguel Barron. I base my decision on several issues. First of all, Claimant experienced an exceptionally devastating loss which requires an exceptional decision. In fact, Respondent did make an exception, by continuing to pay Claimant his commissions while he was out instead of forcing him into unpaid leave. Several witnesses testified for Respondent that they "broke the rule" by paying him his commissions. Therefore, they could have "broken the rule" and found a way to help him receive his deferred compensation 10 months early. Additionally, there was no clear procedure in place for Claimant to plead his case or appeal without attempting to contact some vague location in either London or Zurich. Further, Claimant did not leave UBS, take his book with him and go work for another broker-dealer. He is still at home, caring for his children, with his securities licenses about to expire. Arbitration is not only about law, it is also about equity and fairness. This case calls out for a decision based on fairness. For the above reasons I respectfully dissent and find for Claimant, Miguel Barron.

Bill Singer's Comment

Immediately upon completing my first read of this FINRA Arbitration Decision, I was angered by its lack of content and context. Shame on FINRA. Given the mandatory nature of intra-industry arbitration imposed upon hundreds of thousands of industry employees, FINRA has an obligation to not only provide a fair alternative-dispute forum but also to ensure that there is sufficient content and context in that forum's Decisions.  


13200: Required Arbitration

(a) Generally
Except as otherwise provided in the Code, a dispute must be arbitrated under the Code if the dispute arises out of the business activities of a member or an associated person and is between or among:
      • Members;
      • Members and Associated Persons; or
      • Associated Persons.
(b) Insurance Activities
Disputes arising out of the insurance business activities of a member that is also an insurance company are not required to be arbitrated under the Code.

Given the passionate and profound Dissent, didn't FINRA feel that it needed to request that the Majority revise its draft Decision to offer a modicum of content explaining what constituted the underlying dispute between Barron and UBS? Further, didn't FINRA feel that the Majority needed to provide some rationale for its dismissal in light of the Dissent's implication that the Decision was unfair? To be blunt, how the hell do you appeal from this wasteland of a Decision if you are Claimant Barron -- what language can you cite to demonstrate that the FINRA Arbitration Panel made an error in its findings or failed to properly consider certain issues of fact and/or law? Or, in the end, is that the whole point of mandatory FINRA Arbitration: the self-regulatory organization offers its member/employer firms "cover" in the form of a forum that minimally satisfies the legal requirement of due process while still protecting its members from too much unwanted disclosure of their dirty laundry?

To be crystal clear, I am NOT asserting that the Majority reached the wrong decision. It may well be that Barron was not entitled to any recovery. On the other hand, why the hell don't we know, at the very least, what happened here to justify the dismissal? Why isn't there a standard in place at FINRA to ensure that we have sufficient facts in order to permit us to understand the basic elements of an intra-industry dispute? If, as may be the case from time to time, the disclosure of such facts would result in an unacceptable intrusion into the private life of a party or would exacerbate defamatory conduct, then the Decision should inform us that a more expansive fact pattern has not been provided based upon such considerations,

For those of you who may think that I am over-stating the paucity of content and context in this Decision, please read it for yourself at http://www.finra.org/sites/default/files/aao_documents/16-00207.pdf.

In the end, the two public arbitrators leave us adrift on a sea of unasked and unanswered questions. That unsatisfactory end to the dispute is made all the more disgraceful when we are forced to contemplate the characterizations by the Dissent  that this case involved:

  • an exceptionally devastating loss;

  • an exception, by continuing to pay Claimant his commissions while he was out instead of forcing him into unpaid leave;

  • they "broke the rule" by paying him his commissions;

  • no clear procedure in place for Claimant to plead his case or appeal without attempting to contact some vague location in either London or Zurich;

  • still at home, caring for his children; and

  • This case calls out for a decision based on fairness

Who among us is not wondering what happened here? It may well be that no good deed goes unpunished and that UBS went the extra mile to assist former employee Barron; and, in contrast, it may be that UBS simply did the minimal that Human Resources and Legal said was necessary before throwing Barron under the bus. I don't know. You don't know. And the only folks who were given the legal role to reach that conclusion sure as hell didn't tell us jack. This Decision is an affront to any fundamental notion of fair play.

In the end, FINRA would do well do heed the powerful observation of the dissenting non-public arbitrator:

Arbitration is not only about law, it is also about equity and fairness.

Also READ: "Join The Battle To Reform Wall Street Regulation" (BrokeAndBroker.com Blog, June 2, 2017"