Did UBS Financial Services Inc. financial advisor Scott Rosenberg (CRD# 2754292) recommend you unsuitable YES strategy investments? Rosenberg has been registered with UBS Financial Services Inc. in New York, New York since 2015.
The YES strategy was marketed as an options strategy that was promoted as a safe way to provide investors with additional income. The YES strategy required investors to commit to a certain minimum amount of investment in their portfolio, which typically was in excess of $1 million.
However, this was not the case and many investors were not aware of the risks in investing, and they faced investment losses due to these high-risk securities. The YES strategy offered by other brokerage firms should only be purchased by investors with an aggressive risk tolerance due to the high-risk nature if the market moves against the position.
Some financial advisors misrepresented and recommended the YES strategy to their highest net worth customers, and described it as a safe and efficient way to enhance yield from conservative portfolios. It is alleged that some financial advisors told their wealthy clients that the YES strategy was a low-risk “Iron Condor” options trading strategy. In reality, the YES strategy was unsuitable for many investors and posed a high risk, especially when portfolios were over concentrated with these securities.
It is alleged that financial advisors used an iron condor options strategy that involved writing a series of options all at once or around the same time through S&P 500 derived options. The S&P 500 is a stock index based on the 500 largest companies whose stock is listed for trading on the NYSE or NASDAQ. This strategy involves writing short put options followed by two long, deeper options, a strategy that should be for sophisticated investors that seek a highly complex options strategy.
An iron condor spread is constructed by selling one call spread and one put spread (same expiration day) on the same underlying instrument. The call spread and put spread are of equal width. When an investor sells the call and put spreads, they are buying the iron condor. The cash collected represents the maximum profit for the position.
An example of a recent spike in the stock market was on February 5, 2018, which may have caused investments losses to retail investors. On this day, the dow plunged 1,1175 points, making this the worst point decline in history according to CNN. To make matters worse, some investors were asked to put up additional collateral or face margin deficits.
The Yield Enhancement Strategy options strategy involves buying and selling both puts and calls on the S&P 500. The YES would function when there was little market volatility. However, when the stock market faced times of volatility, the strategy would cause investment losses.
Merrill Lynch, Credit Suisse, Morgan Stanley, and UBS and other brokerage firms across the country are alleged to have offered YES strategies in various forms or products, including through managed accounts, structured notes or funds.
Rosenberg has been the subject of three customer complaints in 2018 and 2019, one of which was denied, according to his CRD report:
- March 2019. “Time Frame: March 13, 2018 to November 16, 2018 The client alleges the advisors misrepresented the strategy makes money because it works like an insurance product and takes advantage of the difference in implied and realized volatility. The alleged damages are estimated to be in excess of $5,000.00.” The case is currently pending.
- February 2019. “Time frame: 12/22/2016 – Present Allegations: Claimant’s Counsel alleges unsuitability and misrepresentation regarding an options overlay strategy investment. Counsel also makes allegations regarding a recommendation to hold the strategy.” The customer is seeking $400,000 in damages and the case is currently pending.
Pursuant to FINRA Rules, member firms are responsible for supervising a broker’s activities during the time the broker is registered with the firm. Therefore, UBS Financial Services Inc. may be liable for investment or other losses suffered by Rosenberg’s 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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