In July, an NASDR arbitration panel ordered the NASD to expunge 16 oral complaints put on a broker's record by PaineWebber.
Former PaineWebber rep Michael Glovas filed the claim in late 1995 alleging that PaineWebber wrongly accused him of signing a customer's name to an annuity contract. After filing the U-5 form, Glovas claimed PaineWebber then filed 16 amendments to his U-5 based on oral complaints from his customers.
According to Glovas' attorney, Kevin Conway of Conway & Conway in New York, PaineWebber also agreed to pay damages to Glovas, although terms are being kept private.
According to the summary of the case, Glovas alleged PaineWebber knew he was going to resign and was attempting to block his registration with a competing firm.
PaineWebber claimed that after the NASD issued an interpretive release in 1995 stating that oral complaints need not be filed, it wrote the NASD requesting removal of the oral complaints on Glovas' record.
Following several arbitration sessions, Glovas was able to establish that no impropriety existed regarding his annuity business, Conway says. The broker and his attorney attempted to show during the hearing that PaineWebber contacted each of Glovas' clients and conducted interviews, which they were able to turn into complaints.
"That's not all that hard to do," says a source close to the case. "The market was a little skittish at the time, and when that happens people often get concerned about the job their broker is doing."
Every one of the 16 customers whose names where attached to the oral complaints followed Glovas to his new firm, and every one of them testified at the arbitration on his behalf, Conway claims. (Unlike court, evidence and testimony in securities arbitrations are not public record.)
Although the arbitration panel gave Glovas no money for his unspecified damages, it did order the oral complaints removed.
"This is really a terrible example of how a firm can try and damage someone's reputation simply because they don't want them to leave," says the source who is familiar with the case. PaineWebber and its outside attorneys, Loren Schechter and Michael Stern of Kirkpatrick & Lockhart in New York did not return calls.