Gana Announcement Press Release FINAL2

In what some attorneys are calling the largest “whitewashing” of a broker’s public record they’ve ever seen, a rep who headed UBS’s defunct Yield Enhancement Strategy (YES) was able to get Finra to expunge 29 arbitration cases against him that led to more than $30 million in client awards.

Finra toughened up its expungement procedures a year ago, but registered rep Matthew Buchsbaum and his attorneys, from the law firm Bressler, Amery & Ross, which is also outside counsel to UBS, were able to file their expungement claim just three days before the reforms designed to stop abuse went into effect. UBS filed for the expungement on behalf of Buchsbaum.

The expungements were granted Sept. 10 by a single Finra arbitrator under the regulator’s old expungement rules, according to Finra documents. Among the reasons for the decisions, according to Finra documents, was Buchsbaum’s “credible testimony as to his limited involvement in the subject trading program.”

The arbitrator also concluded that the complaints “do not involve any alleged improper conduct” by Buchsbaum. “He was not involved in making suitability determinations, soliciting clients or personally administering USB accounts,” the Finra ruling stated. “In all arbitrations filed against him, there were no findings of any wrongdoing. He was not asked to, nor did he contribute, to any USB settlements.”

But Ben Edwards, professor of law at the William S. Boyd School of Law at the University of Las Vegas, contended that the “whitewashing” of such records hurts consumers since they’re unable to use the records to weed out reps who have a preponderance of compliance issues. He cited research by Stanford Law School that showed reps with a single arbitration award against them are 3.3 times more likely to commit future violations than those without an infraction on their record.

“The award illustrates so many problems with the expungement process,” Edwards said.

Neither Buchsbaum nor his attorneys responded to requests for comment. UBS spokesman Jonathan Humphreys said the company declined to comment on the matter. Finra spokesman Joseph Atmonavage also declined to answer questions about the arbitrator’s expungement decision.

UBS’s YES Strategy has been a lightning rod for customer complaints and regulator enforcement since shortly after the firm launched its complex options trading program. In June 2022, the firm agreed to pay $25 million to settle fraud charges with the Securities and Exchange Commission, which asserted that UBS marketed and sold YES to about 600 investors through its platform of domestic financial advisors from February 2016 through February 2017 “without providing its financial advisors with adequate training and oversight in the strategy.”

The agency also said that “although UBS recognized and documented the possibility of significant risk in YES investments, it failed to share this data with advisors or clients.”

In May 2022, a Finra arbitration panel ordered UBS and Buchsbaum to pay $1.4 million to two investors who alleged the firm’s YES strategy was unsuitable and inappropriate for their risk tolerance and investment objectives, resulting in millions of dollars in losses.

“To expunge 29 awards flies in the face of any changes that Finra is making with regard to the expungement procedure,” said Adam Gana, president of the Public Investor Advocate Bar Association (PIABA). “There is no world in which a broker should be able to do this in one fell swoop.”

“If someone is trying to determine if they should hire this individual and they go to BrokerCheck, there are going to be 29 complaints that they’re never going to see,” added Gana, a partner in Gana Weinstein.

Jeffrey B. Kaplan, founding partner of Dimond Kaplan & Rothstein, who represented the investors and numerous others in arbitrations against UBS and Buchsbaum over losses, said he has probably cross-examined Buchsbaum more than any other attorney in the country.

“We strongly believe and proved in our case that the trading that UBS and Buchsbaum did differed dramatically from the way it was marketed. Buchsbaum was the lead trader. Arbitrators believed us. Whitewashing the record now is improper,” Kaplan said.

“Would I hire him to be my broker? No, but that’s just my opinion. He refused to accept responsibility, although he gratuitously said, ‘I’m sorry it happened.’ He was unwilling to accept he deviated from the firm’s marketing strategy.” Kaplan said

There are very narrow circumstances involving arbitrator error under which Finra awards should be expunged, he said. “This is not one of those cases,” Kaplan argued.

Finra’s tougher expungement rules seem to be slowing the steady stream of cases and, because the new rules require that state regulators be served notice so they can object, some expungement claims by reps are being rejected, said Christine Lazaro, an attorney who sat on the committee that helped craft Finra’s new rules.

“While the broker had an obligation to understand the strategy before recommending it, it is possible the arbitrator relieved the broker of responsibility in these cases and granted expungement because of UBS’s role,” added Lazaro, who is professor of clinical legal education and director of the Securities Arbitration Clinic at St. John’s University School of Law. “It is unlikely these would be expunged under the new rules given the time constraints and the need to have a unanimous three-arbitrator decision.”

Since Finra’s new rules went into effect, there has been a 87% decrease in expungement requests, from 644 filed during October 2022 to September 2023, to 84 from October 16, 2023 to September 30, 2024. Finra is also seeing some expungements being rejected by the special roster arbitration panels that must now preside over expungement requests. Previously, and for expungement claims filed before the rule took effect, reps can use a single arbitrator of their choosing, Finra’s Atmonavage said.