The Boca Raton, Fla.-based securities arbitration law firm said it filed the suit with the Financial Industry Regulatory Authority’s Office of Dispute Resolution and is seeking $4 million in damages.
The unnamed claimant worked for Atlanta-based UPS (NYSE: BAC) for 36 years and accumulated UPS shares through the package shipper’s employee stock purchase plan and managers incentive program. The shares were virtually his entire life savings, the law firm said.
The employee also opened a “Hypo Loan” of more than $3.5 million with the UPS stock as collateral. The claimant’s UPS stock was held at Merrill Lynch, now a part of Bank of America (NYSE: BAC), which offered him the line of credit.
The suit claims Merrill Lynch failed to protect the concentrated position in UPS stock by using risk management strategies, like a collar, put options, and/or stop loss orders. As a result, the claimant received margin calls that triggered a sell-off of the UPS stock. This ultimately led to the liquidation of UPS stock and prevented the claimant from recovering his losses through a potential rebound in the price of the stock. Without the margin loan, the UPS stock would not have been liquidated to meet the margin call, giving it an opportunity to recover as the price of UPS stock rebounded since 2009, the suit argues.