FINRA Panel Orders UBS to Pay $1.2M to Former Client

A Financial Industry Regulatory Authority arbitration panel ordered UBS to pay $1,179,939 in compensatory damages and $36,981 in legal costs to former client Kelly Goldsmith, according to her attorney. The three panelists issued no written explanation for the decision, a common feature of arbitration rulings.

Goldsmith accused UBS and advisor John H. Saunders of mismanaging about $900,000 she inherited after her husband’s death more than a decade ago. Her lawyer, Bruce Oakes of Oakes and Fosher in St. Louis, says roughly one-third of those funds were placed in an annuity with high fees. Separately, $270,000 from the sale of Goldsmith’s South Carolina home was moved into an advisory account that generated management fees and, Oakes said, triggered UBS’s fiduciary duty to act in her best interest.

Goldsmith wanted to use the advisory-account funds to buy a new home in Hilton Head, North Carolina. Instead, the complaint says advisor Saunders persuaded her to take a securities-backed loan. Oakes argued that the loan arrangement allowed the firm and Saunders to earn interest on the loan while continuing to charge management fees on the assets remaining in the advisory account.

Expert testimony presented at the arbitration compared Goldsmith’s actual account performance with a hypothetical stock-only investment. According to the testimony cited by Oakes, the advisory account produced less than 1% in annual gains from 2013 through 2023, a period that included a broad market upcycle. Goldsmith’s claims included breach of fiduciary duty, breach of contract, negligence, fraud and negligent supervision. She initially sought $400,000 in damages and later increased the claim to $2 million. UBS declined to comment.

Saunders is not named in the FINRA decision against UBS. BrokerCheck records show six disputes involving Saunders dating to 2009: three were settled, two were denied by UBS, and one remained pending. In a July 2014 matter, UBS paid $100,000 to settle a client allegation that Saunders failed to follow investment instructions; Saunders responded in writing that the client had accepted his recommendation to enter a stop-loss order and that the settlement avoided further litigation. Douglas Schulz, president of Invest Securities Consulting, described multiple complaints over time as a warning sign for investors.

The arbitration award does not end Goldsmith’s litigation with UBS. She is one of several plaintiffs who filed a federal lawsuit in 2024 against large wealth managers over cash sweep policies. Those suits allege brokerages moved uninvested client cash into bank programs and kept too much of the resulting returns. In March, U.S. District Judge Gregory Woods allowed Goldsmith and another plaintiff to continue pursuing breach of contract claims in the Southern District of New York while dismissing duplicative unjust enrichment claims.

The FINRA award resolves Goldsmith’s arbitration claims but leaves her federal cash-sweep litigation against UBS ongoing.