In January 2020, Erez Law filed a FINRA claim against UBS Financial Services for Yield Enhancement Strategy (YES) program losses with brokers Christopher Aitken and Ken Tonning. The Erez Law clients, who are an elderly married couple, allege that Aitken and Tonning recommended the clients invest in the YES program and suffered significant losses.
It is alleged that UBS’ YES program was represented to investors as a low-risk, market-neutral strategy that allows investors to generate enhanced yield while reducing risk, all without requiring investors to deposit additional funds into their UBS account. UBS’ YES program involves using the equity in an investor’s UBS account to pursue a low-risk options strategy involving a combination of put and call options on the S&P 500 index.
In the event the price of the underlying asset increases or decreases significantly, the purchased put or call options would provide a maximum limit to the investor’s downside risk. In the case of UBS’s YES program, the investor’s profits would also be reduced by UBS’ YES program advisory fees.
The YES strategy actively engaged in market timing and taking directional positions on the market and suffered significant losses as a result. One possible and most likely explanation for UBS’ motivation for recommending the YES program is the significant fees (1.75% investment advisory fee) it generated for UBS. It is alleged that UBS breached its fiduciary duty by placing its interests before those of their customers.
According to the claim, the husband informed Aitken and Tonning that he was approaching retirement and seeking to invest his entire portfolio in conservative and low-risk investments that would preserve his irreplaceable retirement savings. Aitken assured the clients that he would employ a conservative and low-risk investment strategy that would generate a modest amount of income while preserving the couple’s irreplaceable principal. Aitken told the couple that “you’ve hit a home run” and therefore “there is no need to be so risky.” Aitken assured the clients that under his management, his assets would be invested conservatively. Regrettably, Aitken, and Tonning and UBS recommended a speculative and unsuitable investment strategy which they misrepresented to the couple as a conservative and low-risk strategy that would generate income while preserving their principal. In reality, it was just the opposite.
Based upon Aitken’s representations, the couple agreed to become customers of Aitken and Tonning and Merrill Lynch. In May 2017, Aitken and Tonning began working at UBS and solicited the couple to transfer their accounts to Aitken and Tonning and UBS, which they did.
It is alleged that Aitken and Tonning recommended the couple enroll in UBS’S high risk and unsuitable Yield Enhancement Strategy (YES) program. UBS was targeting high net worth investors to whom to sell its lucrative and fatally flawed strategy. On multiple occasions, the clients were provided with marketing materials that reinforced the notion that YES was a safe and conservative investment. Consistent with UBS’S marketing materials, Aitken and Tonning represented to investors that the YES program was a conservative, safe, and low-risk investment strategy that provided consistent returns. Additionally, it is alleged that Aitken and Tonning portrayed the YES program as a low-risk way to provide supplemental income and diversify the couple’s conservative portfolio.
According to the claim, Aitken and Tonning represented to investors that even in the event of unfavorable market conditions, the YES program provided “upside and downside protection” and employed hedging options designed to “mitigate downside risk” and “limit exposure to significant upside or downside market moves.” In reality, this was grossly misleading and untrue. In fact, Aitken and Tonning represented to investors that even in the event of unfavorable market conditions, the YES program provided “upside and downside protection” and employed hedging options designed to “mitigate downside risk” and “limit exposure to significant upside or downside market moves.” In reality, this was grossly misleading and untrue.
Regrettably, the couple incurred significant losses in the UBS YES program.
Erez Law represents investors in the United States for claims against brokers and brokerage firms for wrongdoing. If and 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.