By Kenneth Corbin

UBS is asking a court to overturn a $95 million award an arbitration panel recently ordered it to pay a group of investors over a dispute about a short selling strategy that didn't pan out.

The award at the time was the largest ever won by retail investors in an arbitration proceeding convened by the brokerage industry self-regulator Finra. (It was eclipsed in a matter of days by a larger award involving a case brought by Stifel investors.)

UBS this week filed a petition in U.S. District Court in Iowa's Southern District asking the court to vacate the award, which held UBS liable for $23 million in compensatory damages and $69 million in punitive damages. The broker involved, Andrew Burish, a Barron's Hall of Fame advisor based in Madison, Wis., was hit with $3 million in compensatory and punitive damages in the same award.

The investors complained that Burish's strategy of short selling Tesla stock in the hope that its share price would fall from 2017 through 2020 backfired, and accused UBS and their broker of a breach of fiduciary duty, violating Finra's rule on suitable investment advice, negligent supervision, and fraud.

A lawyer for the investors declined to comment "because this matter remains pending."

The investors claimed that the short selling strategy was speculative and designed to chase short-term profits by "holding highly risky positions at odds with the asset protection and multigenerational wealth transfer advertised as its marketing offering."

Burish countered that the investors were "wealthy and experienced short traders who were well advised of the substantial risks of short selling and chose to initiate and hold their short positions in the face of losses and volatility."

In its filing, UBS called the punitive damages award "grossly excessive, irrational, and contrary to well-defined and dominant public policy." It argued that the appropriate maximum penalty for punitive damages should not have exceeded the $23 million in compensatory damages the arbitration panel awarded the investors.

UBS is asking the court either to vacate the award in its entirety or to reduce the punitive damages component to match the compensatory damages award.

Court records indicate that the investors haven't yet responded to the petition.

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

April 02, 2025 15:39 ET (19:39 GMT)

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