Former UBS Broker Sues Firm

A former UBS broker filed a lawsuit against the firm, alleging it forced him to resign for cooperating with regulators, the Boston Globe reported.

The former broker, Timothy P. Flynn, sold $30 million in auction-rate securities to Massachusetts towns and cities. In a complaint filed with the Department of Labor (DoL) in New York, the former UBS broker alleged UBS Financial Services Inc. locked him out of his office and cut him off from e-mail shortly after he testified as part of an investigation of the firm. A UBS spokesman denied Flynn’s allegations, the Globe reported.

UBS settled with state Attorney General Martha Coakley’s investigation of the firm by agreeing to buy back $37 million investments sold by Flynn and others to 17 towns and cities and the Massachusetts Turnpike Authority, the newspaper reported.

The testimony from Flynn implicated UBS in fraud. According to Flynn’s complaint, he told investigators in an April meeting that UBS had led its brokers to believe auction-rate securities were cash alternatives, similar to money markets, the paper reported.

His testimony preceded a fraud suit filed by the Massachusetts Securities Division last week against the firm, alleging UBS misrepresented the risks of auction-rate securities to customers and failed to disclose its conflicts in selling them. UBS said it would defend itself against the allegations, the Globe said (see UBS Securities Faces Charges of Fraud by Mass. Authority).

Flynn worked at UBS since March 2006, according to his broker record, and was a senior vice president. Flynn e-mailed his UBS superiors ahead of his meeting with the attorney general, saying he intended to cooperate, but UBS’ lawyer said e-mail was not an appropriate vehicle for such a discussion, the Globe reports.

Post-testimony, after being barred from his Manhattan office, Massachusetts clients, and computer, Flynn was ultimately suspended, the complaint says, then told he had to resign, or face being fired, the Globe reports.