Finra arbitrators have directed UBS Financial Services Inc. to compensate a senior investor in Texas with more than $500,000 due to an excessively concentrated portfolio weighted heavily in unsuitable energy, real estate, and financial securities.

UBS ordered to pay investor $532,846 for overly risky portfolio
Photo from Investment News

Risky Portfolio

Based on the Investment News’ article, Pamela J. Borders alleged that a UBS registered representative in the firm’s Dallas office recommended an inappropriate concentration of undiversified and over-leveraged deposits, failing to guide credit line balances to prevent margin calls and forced liquidations. The arbitration award, issued on July 3, found UBS liable for $380,158 in compensatory damages plus 5% annual interest from Borders’ claim filing on August 9, 2022. Additionally, UBS has been ordered to cover $152,063 in attorneys’ fees and $625 in filing costs.

The request for expungement by UBS broker David Ray Barnes, who remains employed by UBS in Dallas, was denied by the arbitration panel of the Financial Industry Regulatory Authority Inc.

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Borders, who filed the claim individually and as a Pamela J. Borders Regular Marital Trust trustee, initially sought $3.4 million in compensatory and punitive damages. Although her lawyer, Robert Wayne Pearce, expressed satisfaction with the victory, he believed the award should have been higher. Pearce criticized the arbitrators for calculating net losses based on Barnes’ tenure managing the account from February 2016 to March 2020 rather than focusing on the losses incurred during the period surrounding the forced liquidation—February 2020 to March 2020—amidst the onset of the coronavirus pandemic.

According to Pearce, the arbitration process seemed biased in favor of UBS due to using a formula that favored the firm. He referred to it as an “industry-captured arbitration.” UBS declined to comment on the matter when approached by reporters.

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