Bass, Berry & Sims attorney Chris Lazarini provided additional insight case in which a former investment advisor at UBS sought to prevent the company from collecting on promissory notes the advisor owed to UBS upon his departure. He previously examined the case in September 2018 and October 2018. In this latest development, Chris discusses the court’s decision related to the appointment of a receiver, which the court deemed to be an extraordinary remedy and established only after demonstrating clear and convincing evidence.

Chris provided the analysis for Securities Online Litigation Alert (SOLA). The full text of the analysis is below and used with permission from the publication. If you would like to receive additional content from the SOLA, please visit the SOLA website to sign up for the newsletter.

UBS Financial Services, Inc. vs. Assurance Investment Mgmt., LLC, No. 107954 (Ohio App., 8Dist., 9/12/19)

The appointment of a receiver is an extraordinary remedy, the need for which must be established by clear and convincing evidence.

This is another chapter in UBS’ ongoing efforts to collect a $196,963 FINRA promissory note award owed by former representative Albert Lacava (FINRA ID #08-04976 (Cleveland, 2/9/10)). Attempting to shield assets from collection, Lacava formed Defendant Assurance (“AIM”), an investment management company, and transferred a 95% ownership interest to his wife. As AIM’s only registered person, however, he purportedly retained control over the company’s activities and attempted to conceal the transfer from UBS. The trial court described the Lacavas’ actions as “‘the most blatant form of fraudulent conveyance this court has ever seen[,]'” found the transfer fraudulent, froze the Lacavas’ and AIM’s assets, and awarded UBS $98,481 in punitive damages and $50,635 in attorneys’ fees and costs. We have followed the appellate court’s decisions rejecting Mr. and Mrs. Lacava’s respective appeals and affirming the trial court’s rulings at SOLA Ref. No. 2018-32-04 and 2018-36-03.

Here, the Court considers the Lacavas’ appeal from the trial court’s order appointing a receiver for AIM. The order was entered after the Lacavas and AIM repeatedly failed to respond to UBS’ discovery and gave the receiver authority over AIM’s assets and the power to lease the Lacavas’ residence, which was also AIM’s principal place of business. Noting the appointment of a receiver is an extraordinary remedy, the Court affirms, finding the record below supports the appointment because, after the Lacavas’ fraudulent transfers and failure to provide discovery, the receiver was necessary to preserve assets and give effect to the prior judgment. For the same reasons, the Court also finds no error in the receiver’s collection of rents at the Lacavas’ residence. However, the Court finds the record unclear on whether AIM owns the residence and/or whether it is a lessee or lessor and declines to give an advisory opinion whether the receiver was authorized to lease the property or pursue forcible entry and detainer actions against it.