In July 2023, Erez Law filed a FINRA arbitration against UBS Financial Services Inc. regarding dangerously concentrated and leveraged investment in related to UBS Yield Enhancement Strategy (YES) losses.

Their customer alleges investment losses with broker William Cerf (CRD# 2269462), who has been a registered representative of UBS Financial Services Inc. in New York, New York, since 2015. 

The Erez Law client alleges the following in the newly filed FINRA claim:

The client was seeking to preserve their irreplaceable retirement savings while generating a modest degree of income and return from their investments during their retirement years. The money invested represented the client’s irreplaceable retirement savings, and they informed the broker that they were not interested in exposing their retirement savings to a high degree of risk. Erez Law alleges that he assured the client that he only recommended investments and strategies that been thoroughly vetted and were designed to limit risk. 

It is alleged that he recommended a speculative and unsuitable investment strategy involving a UBS’s high-risk proprietary options overlay program known as the Yield Enhancement Strategy, commonly referred to by its acronym YES.

According to the claim, the client had never invested in an options overlay strategy before.  They neither requested nor needed an options overlay investment strategy. 

It is alleged that he presented YES as a “vetted, best in class” options strategy which required “zero cash investment” and would add approximately 6% to the returns they were already generating on the underlying collateral assets.  

Regrettably, he failed to truly understand the material risks and characteristics of YES and in so doing violated his duties to the client including, but not limited to, his duties and obligations pursuant to the FINRA suitability rule.

UBS strictly prohibited its employees from using the performance record of  the Credit Suisse version of YES, to solicit investors to invest in the UBS Financial Services Inc. version of YES, as the firm does not have access to the underlying data for the YES program at Credit Suisse. However, that is precisely what they did. He allegedly disclose that the Credit Suisse track record used to solicit the Erez Law client, was actually the performance of a different product offered at a different firm.

In addition, it is alleged that he failed to adequately disclose to the client the significant risk of loss of principal associated with the YES program.  

The client had virtually no experience in complex options strategies such as those employed by YES. They were not seeking an options strategy and did not adequately understand the complex options strategy employed by YES.  

According to the complaint, UBS Financial Services Inc. and William Cerf generated advisory fees on the underlying assets that served as collateral for the YES accounts, and also generated a second layer of fees on those same assets by recommending the YES program. In other words, he was able to generate two revenue streams from the same underlying assets without the client transferring in any new assets to the firm, in what may be referred to  as double dipping.  

By following his advice to remain invested in YES, not only did the client incur significant losses, they also incurred significant margin interest charges, which were in addition to the YES management fees they were being charged.  

Regrettably, this case is far from an isolated incident. UBS Financial Services Inc. and William Cerf recommended YES to numerous other customers, including the numerous investors who have already filed claims against UBS for losses in YES.  

Erez Law Files Claims for UBS Yes Investment Losses

As of July 2018, UBS Financial Services Inc. had over 1,440 customers enrolled in YES with total mandates in excess of $5.7 billion. The firm closed YES to new investment in Nov. 2018 because it determined that YES was no longer a good investment  

Erez Law has been successful in recovering investment losses related to investments in UBS’s YES program. The securities fraud attorneys at Erez Law have tried and won four FINRA cases against UBS Financial Services Inc. for YES losses, including: 

• $3.8 million related to the unsuitable nature of the YES investment for the client’s risk tolerances and investment objectives. 
• $1.34 million related to the recommended speculative managed account options strategy, which was unsuitable for the Claimants.
• $975,606 related to brokers who misled clients who didn’t understand the risky UBS YES program
• $1.1 million related to negligence and negligent supervision with regards to managed-account options strategy with UBS’ YES

William Cerf Faces Suitability Charges

William Cerf has been the subject of five additional customer complaints between 2019 and 2023, one of which was withdrawn, according to his CRD report:

December 2022. “Time frame: Early 2016 – March 2020 Allegations: Claimant’s counsel alleges unsuitability and misrepresentation with respect to recommendations to invest in and hold an options overlay strategy.”

June 2020. “Cerf was a subject of the customer’s complaint against Cerf’s member firm that asserted the following causes of action: fraud; misrepresentation; unsuitable product; breach of fiduciary duty; negligence; failure to supervise; and breach of contract under the federal securities laws, FINRA regulations, applicable New Mexico state securities laws and applicable common law.” The customer sought $1,109,484.73 in damages, and the customer was awarded $1,109,484.73 in compensatory damages, $26,147.50 in expert witness fees, and $311,030.67 in attorney’s fees. 

February 2020. “Time frame: 2017-2019 Claimant’s counsel alleges unsuitability and misrepresentation with respect to recommendations to invest in and hold an options overlay strategy.” The customer is seeking $2,200,000 in damages, and customer was awarded $2,205,166.40 in compensatory damages, plus $160,378.88 in pre-judgement interest, and $26,512.50 in expert witness fees. The complaint was regarding in-house wrap fees. The complaint was regarding in-house wrap fees.

September 2019. “Time frame: Mid 2016- present Claimant’s counsel alleges unsuitability and misrepresentation with respect to recommendations to invest in and hold an options overlay strategy.” The customer is seeking $7,000,000 in damages and the case is currently pending. The complaint was regarding in-house wrap fees.

August 2019. “Time frame: 2016 – present Claimant’s counsel alleges unsuitability and misrepresentation with respect to recommendations to invest in and hold an options overlay strategy.” The customer is seeking $600,000 in damages, and the case was settled for $245,000. The complaint was regarding in-house wrap fees.

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 William Cerf’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.