Ex-Broker Sues UBS for Having to Pay for Client Associates, Other Expenses
A former UBS Financial Services broker who was fired in May has filed a lawsuit alleging that the broker-dealer violated California labor law by forcing its brokers to pay salaries of client service associates and other “ordinary” business expenses involved in running their practices.
The lawsuit, filed Tuesday in the U.S. District Court for the Northern District of California, seeks class-action status on behalf of all brokers who worked for UBS in California in the four years leading to the filing date through the time the class may be certified.
Ankit Sahu, who worked as an advisor for five years at a UBS branch in San Francisco, said that UBS illegally shifted onto himself and other brokers costs of settlements, judgments, awards, and errors, wages of support staff and other reasonable and necessary business expenses. Since most brokerage firms deduct about 70% of salary costs for associates from brokers’ standard pay, the suit is likely to attract widespread attention, lawyers said.
A UBS spokesman did not respond to a request for comment.
UBS discharged Sahu in May following an internal review that found he facilitated a loan between two clients in violation of firm policy and provided unsatisfactory responses during the investigation, according to his BrokerCheck record. In June, a customer filed a complaint seeking repayment of a $161,550 loan, according to the database.
Neither Sahu, who now works at Prosperity Wealth Management in San Ramon, Calif., nor his lawyer, Edward Wynne, responded to calls for comment. Sahu began his career in 2003 at Equity Services in Vermont and has worked at Merrill Lynch, Citigroup and four other firms, according to BrokerCheck
While the claim may be motivated by sour grapes, its allegations of California labor law violations could stand scrutiny as more than a nuisance complaint, said Jeffrey K. Riffer, an attorney at the Los Angeles firm of Elkins Kalt Weintraub Reuben Gartside, which represents brokers and broker-dealers in employment disputes.
“California generally provides that employers, not employees, must pay for all ordinary business expenses,” said Riffer, who is not involved in the case. “Financial advisors should not have to pay for client associates or other normal business expenses.”
Winning class status for other advisors may prove difficult, Riffler said, and UBS is also likely to argue that the case should be litigated before an arbitration panel rather than in court.
The lawsuit alleges that UBS “committed an act of unfair competition by illegally deducting these amounts from the wages of Plaintiff and the members of the proposed Class and/or failing to reimburse these amounts to Plaintiff and the members of the proposed Class.”
It also alleges that UBS failed to timely pay Sahu compensation he was owed when he was terminated, but does not specify an amount or the type of compensation allegedly withheld.
In late August, four former sales associates at Merrill Lynch sued the company in federal court in New York in a class-action certification complaint alleging that Merrill illegally withheld overtime pay from them.