UBS Loses Code-theft Case Against Former Employees

- Updated June 30, 2010

FINRA arbitrators have ruled against UBS and in favor of its three former employees in a case of alleged theft of algorithmic trading code.

The three employees – Jatin Suryawanshi, Partha Sarkar and Sanjay Girdhar – were accused of “misappropriation of trade secrets, breach of contract, breach of fiduciary duty, unfair competition and other wrong doing” while they were employees of UBS Securities LLC.

According to the UBS complaint, the programmers obtained proprietary confidential information – specifically, source code for the company’s proprietary algorithmic trading programs – and planned to disclose it to their new employer, Jefferies & Co.  In addition, they began their new jobs at Jefferies while they were still employed by UBS. Finally, Suryawanshi breached “his fiduciary duties” by recruiting Sarkar and Girdhar to join him at Jefferies, UBS claimed.

FINRA spokesman Brendan Intindola said that the organization, which issued its ruling Feb. 5, doesn’t comment on arbitration case results.

UBS spokeswoman Kelly Smith also said that the firm will not comment about this case.

On background, one party close to the case told Securities Industry News that this is the end of the matter, with no further action planned by either party.

According to the arbitration panel ruling, all requests for injunctions or damages were rejected, with the arbitration fees to be split between UBS and the programmers.

One member of the  three-person arbitration panel dissented from the decision, but no information was available about why the panel ruled the way it did or why one of the arbitrators dissented.

“Arbitral decisions do not generally set forth the rationale for the result reached,” said Harvey Pitt, former chairman of the U.S. Securities and Exchange Commission, now chief executive officer of Washington, D.C.-based consulting firm Kalorama Partners LLC. “Thus, it isn’t clear if the panel majority acted because it didn’t think the three men had stolen the code, or whether they thought that, even if the code had been stolen, no remedy existed. If it’s the former, that certainly would be a rational conclusion. If it’s the latter, that would be a real problem.”

As of deadline, lawyers representing the three former employees have not responded to requests for comment.

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