Court affirms $95.3M FINRA award against UBS

A federal judge in Iowa confirmed a $95.3 million arbitration award against UBS tied to recommendations by advisor Andrew Burish that clients short Tesla stock. U.S. District Judge Stephanie M. Rose of the Southern District of Iowa denied UBS’s motion to vacate or reduce the award and invoked the Federal Arbitration Act, noting that judicial review of arbitration awards is narrowly limited.

The FINRA panel issued the award in March after 39 days of hearings brought by members of an extended family led by Dennis and Leslie Hansen. Claimants said Burish repeatedly urged them to maintain short positions in Tesla from June 2017 to July 2020, despite steep losses. The panel found violations of UBS guidance, FINRA rules and common-law duties.

Judge Rose summarized evidence presented at arbitration. Burish was described in filings as a “self-described risk taker” and was the only advisor in his Madison, Wisconsin, office to recommend shorting Tesla. The record showed 878 phone calls, voicemails with price predictions, and 885 private text messages to the claimants between June 2017 and July 2020. Nearly half of those communications occurred after September 27, 2019, a period when the claimants sustained their largest losses and when many messages allegedly broke UBS policy and FINRA rules.

The award included $69.7 million in punitive damages. UBS argued the panel failed to provide a written justification for punitive damages and said imposing such damages in arbitration violated its due process rights. Judge Rose rejected those arguments, noting that most FINRA awards do not include written reasoned opinions unless both parties request one and that court-style due process protections do not apply in the same way to arbitration. She wrote that accepting UBS’s position would allow losing parties to “end-run the prohibition on judicial reconsideration of the merits of an arbitration award.”

On his BrokerCheck entry, Burish described the clients as “wealthy and experienced investors” who were advised of the risks of short selling Tesla and who chose to initiate and hold their positions despite volatility and losses. UBS released a statement calling the decision “disappointing” and saying the firm respectfully disagrees with the ruling.

Judge Rose noted the parties’ account agreement designated FINRA arbitration as the dispute forum and included language acknowledging that judicial review of an arbitration award is “very limited.” Courts have recently rejected other bids to overturn large FINRA awards, including a $132.5 million award in March and a separate challenge to a $1 million award involving UBS that was also denied.