An arbitration claim filed with the Financial Industry Regulatory Authority (FINRA) has asked for $23 million in damages and has accused brokerage firm UBS and its financial advisor Andrew Burish of violation of suitability guidelines of FINRA as well as breach of fiduciary duty. In addition, UBS has been accused of failing to supervise its brokers. Punitive damages and costs claimed apart from the $23 million are unspecified.
The claim specifies that the $23 million loss was incurred by a set of four couples who are part of an extended family and one other investor. The family includes Dennis Hansen, the CEO and owner of a torque-convertor maker in New Hampton by the name of Precision and a manufacturer of automatic flushing systems for oil coolers and heat exchanges by the name of HotFlush, Inc., as gleaned from his LinkedIn profile. Hansen, along with his wife, lost the largest amount, $16.5 million. The other people in the family who lost money are their three children and their spouses.
Both Hansen and Simmons Perrine Moyer Bergman’s Cedar Rapids, Iowa-based lawyer Paul Gamez, who is representing the claimants, have not commented on the story.
The losses, and claim, arising from the short-selling of Tesla stock that Burish has been repeatedly promoting in 2019 and 2020. Short-selling is a strategy that seeks to profit from a decline in the price of the stock being considered.
The claimants have argued that “His recommendation focused on his conviction that lots of money would be made because Tesla common stock was overvalued and certain to lose its value,” and that “No balanced view of the risk of loss was provided by Burish.”
For the record, the Tesla stock was trading at $60 in early 2019. The per-share price, since then, has skyrocketed to $720. In hindsight, a short-selling strategy in the stock was likely to come a-cropper. Hansen and his wife finally covered their shorts in July 2020 and exited the positions they had taken in Tesla. They claim that even at that stage they did it “against Burish’s advice.”
Classifying them as ‘sophisticated investors’ with an understanding and tolerance of associated risks, a UBS spokesman said that “The claimants…had previously engaged in short-selling and were aware of the risks and potential rewards of this strategy,” and that “The claimants confirmed to UBS that they were willing to accept those risks.”
That being the stand taken by UBS, Hansen’s direct approaches to UBS through written complaints had, unsurprisingly, been met by denial of any wrongdoing.
Who is Andrew Burish?
Based in Madison, Wisconsin, Andrew Burish is a 38-year industry veteran who started his career with UBS in 1984 and currently leads one of the most profitable teams of UBS in the Midwest, the eponymous The Burish Group, founded in 1991. It has $4 billion in assets under management and is staffed with 14 members on the team.
Barron’s has counted Burish as one among the top 100 advisors in all of the US while he was ranked as the top broker in the state by Forbes.
Burish has just one other complaint on his BrokerCheck record dating back to 2010. The case pertained to unsuitable recommendations made in 2008 regarding structured products. The claim of $1.2 million is reported as settled for $1 million.
Describing the clients as “highly successful, sophisticated business people who were involved in numerous high dollar projects,” Burish neither contributed to the settlement nor admitted to any wrongdoing. In the comments, he had added that “These investments were suitable for the client and the client was so pleased with the return, they requested to buy more.”
Other issues
Other concerns about the team are also surfacing, related to options trading.
In 2018, several people on Burish’s team were terminated on grounds of a junior associate not closing out a losing trade resulting in losses to UBS. In addition to the associate, this termination included a producing manager and a regional compliance officer. This even prompted the issuance of additional restrictions on brokers seeking to trade naked options in family accounts or their own, by UBS.
FINRA awarded an arbitration settlement of $11 million to the sacked regional compliance office, Mark Munizzi, on grounds of UBS having defamed him in their U5 notice. UBS moved an Illinois State Court against the award which was denied. UBS has now appealed to the First Judicial District for the Appellate Court of Illinois. The appeal is pending.
“It is clear that Munizzi was not terminated for the reasons stated in the Form U5 but rather to protect a senior member of a large revenue-producing retail team …,” was the opinion of Munizzi’s lawyers, as written in the FINRA defamation complaint filed in 2019.
This article originally appeared on alphabetastock.
