Erez Law recently won a FINRA arbitration claim against UBS Financial Services Inc. for Yield Enhancement Strategy (YES) program losses. This is the 4th award that Erez Law has won against UBS Financial Services Inc. for YES program losses.
In June 2022, a former client of UBS Financial Services Inc. won an award in a FINRA arbitration for $475,482 in compensatory damages, $500,000 in punitive damages, $325,161 in attorney’s fees, and $41,475 in costs.
The causes of action included: “breach of fiduciary duty, negligence, negligent supervision, fraud, breach of contract, violation of Section 10(b) of the Securities Exchange Act and Rule 10b-5 of the Securities and Exchange Commission, violation of the Texas Securities Act, and violation of the Georgia Securities Act. The causes of action related to Claimants’ allegation that Respondent, through its agents, recommended a speculative managed account options strategy, the Yield Enhancement Strategy (“YES”), which was unsuitable for Claimants.”
The retired couple was retired, of advanced age, and generally averse to high-risk or speculative investments. They entrusted UBS Financial Services Inc. and their brokers with all of their securities investments, placing a high degree of trust and confidence in UBS and their brokers. The Erez Law clients were primarily interested in receiving a stable distribution from their portfolio without subjecting their irreplaceable retirement savings to undue risk.
UBS Financial Services Inc. and their brokers recommended a speculative and unsuitable proprietary investment strategy which they misrepresented as a safe income-generating strategy with unacceptable results. UBS Financial Services Inc.’s YES program was represented to investors, including the Erez Law clients, as a low-risk strategy allowing investors to generate enhanced modest yield without requiring them to deposit additional funds into their YES account.
Regrettably, the brokers believed there was virtually no realistic prospect of their clients losing any capital in YES. They went so far as to represent to the clients that “The world would have to end for this to go bad.”
Contrary to UBS Financial Services Inc. and the brokers’ representations, YES was a high-risk and unsuitable leveraged strategy that involved a significant risk of loss of principal. By recommending that the clients have an excessively large mandate in YES, the risk to which the Erez Law clients were unknowingly exposed was further increased.
Additionally, UBS Financial Services Inc. and the brokers could generate additional and excessive fees by selling YES to the clients. UBS and the brokers generated fees in connection with the accounts that served as collateral for YES and also generated a second layer of fees by recommending YES, with an annual investment advisory fee of 1.75%; they were able to generate two revenue streams from the same assets in what may be referred to as double dipping.
Recently, Erez Law won three additional FINRA cases against UBS Financial Services Inc. for YES losses:
- $1.1 million award that included $900,000 in compensatory damages, $56,717 in costs, and $225,000 in attorney’s fees
- $3.8 million award that included the clients’ losses of $2 million and $965,657 in attorney’s fees
- $976,155 award, including prejudgement interest for $687,644, $58,644 in costs, and attorney’s fees of $229,134
Under FINRA Rules, member firms are responsible for supervising a broker’s activities when the broker is registered with the firm. Therefore, UBS Financial Services Inc. may be liable for investment or other losses suffered by its customers.
Erez Law represents investors in the United States for claims against brokers and brokerage firms for wrongdoing. If you have experienced investment losses, please call us at 888-840-1571 or complete our contact form for a free consultation. Erez Law is a nationally recognized law firm representing individuals, trusts, corporations, and institutions in claims against brokerage firms, banks, and insurance companies on a contingency fee basis.
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