Former part-time clerk asks judge to rein in UBS' efforts to lasso him in FINRA arbitration worth millions

By Dan Churney | Sep 15, 2015

A former clerk with UBS Financial Services in Chicago has gone to Chicago federal court, arguing the Financial Industry Regulatory Authority has no jurisdiction over him in a multi-million dollar arbitration action brought against him by UBS for allegedly breaching his employment contract.

On Sept. 10, Alexander Freund lodged a two-count complaint against New Jersey-headquartered UBS Financial Services, seeking declaratory judgment and an injunction. UBS has offices in 50 countries and throughout the United States, including Chicago, offering investment and asset management services.

In November 2011, Freund was hired by UBS as a minimum-wage, part-time clerk at the company’s Chicago branch. His contract with UBS did not contain any provision for arbitration. Less than three months later, Freund quit UBS to take a job with Wells Fargo. Freund’s manager, David Kinnear, and two other employees, broker Kathleen Bakas and associate Steven Fryman, also left at the same time.

On Feb. 15, 2012, UBS sought an injunction in Cook County Circuit Court to prevent Kinnear and Bakas from possibly breaching covenants in their UBS employment agreements. The next day, UBS filed an arbitration claim with the Chicago office of FINRA against Kinnear, Bakas and Wells Fargo.

FINRA is a private corporation that regulates firms doing business in securities. The U.S. Securities and Exchange Commission is the ultimate overseer of the securities industry, as well as of FINRA.

The circuit court action was settled between the parties Oct. 19, 2012. Four days later, UBS amended its arbitration claim to include Freund and Fryman – neither of whom were named in the circuit court matter – saying it had cause against Freund for breach of contract, fiduciary duty and duty of loyalty.

Freund’s response was to object to FINRA’s jurisdiction over him, as his employment agreement with UBS had no provision for arbitration. He further noted FINRA’s own rules backed him up on this point. UBS next filed requests for discovery from Freund, but Freund replied he would not answer the requests on jurisdictional grounds.

UBS countered with a motion to compel Freund, which FINRA granted after rejecting another salvo of Freund’s arguments about jurisdiction. In doing so, FINRA cited the “broad language” of FINRA’s code of procedure and the wording of Freund’s agreement with USB, as the bases for its decision, but without spelling out specific language in either citation.

Freund stressed his only participation with the FINRA arbitration has been to point out he should not be a party to the matter. The situation will soon come to a head, though, as Freund was informed Sept. 8 he is set for a two-week hearing beginning Oct. 26 at FINRA’s Chicago office.

As a result, on Sept. 10 Freund sought federal intervention to declare he has no obligation to take part in arbitration and is beyond FINRA’s power. In line with this, Freund wants FINRA to be prohibited from taking any further action against him.

Freund argued he refuses to go along with FINRA’s order to answer discovery, because to do so, would force him to “submit to arbitration claims he never agreed to arbitrate” and if he does comply, his rights would be compromised in the event the arbitration proceeds against him.

In addition to the other relief sought, Freund wants FINRA to pay his legal costs.

Freund, who lives in Massachusetts, is represented by the Chicago firm of Greiman, Rome & Griesmeyer.

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Organizations in this Story

Financial Industry Regulatory Authority Greiman, Rome & Griesmeyer, LLC UBS

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