Erez Law Files Claim for UBS Financial Services YES Investment Losses with Broker Eric Wittenberg
Posted on Monday, October 26th, 2020 at 8:32 pm
In May 2020, Erez Law filed a FINRA claim against UBS Financial Services for Yield Enhancement Strategy (YES) program losses with broker Eric Wittenberg. The Erez Law client alleges that Wittenberg recommended he invest in the YES program and due to those recommendations he 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.
The Erez Law client was retired and interested in reducing his allocation to equities as well as increasing his fixed income allocation in order to reduce risk and generate additional income. The client explained that he relied in part on the income generated by his securities investments to meet his living expenses. The funds that the client eventually entrusted to Wittenberg represented the vast majority of his liquid net worth and his capital that he could not readily replace. Regrettably, Wittenberg recommended a speculative and unsuitable proprietary investment strategy which it misrepresented as a safe income-generating strategy with unacceptable results.
Wittenberg recommended the client enroll in UBS’ high risk and unsuitable YES program. UBS was targeting high net worth investors to whom to sell its lucrative and fatally flawed strategy.
It is alleged that Wittenberg represented that YES had a stellar track record over 12 years and that downside risk was limited to a short term decline of 1-2%. Based on Wittenberg and UBS’ representations and recommendations, the client invested in the UBS YES investments.
When the client noticed the account declining in value he contacted Wittenberg to express his significant concerns. The client was interested in terminating the YES program. Wittenberg recommended against it and represented to the client that increased volatility would lead to higher options premiums and a recovery in the YES program. Wittenberg also represented to the client that he and many of his clients were invested in YES, that he is not selling, and that he is not recommending that his clients sell. Regrettably, the client did follow Wittenberg’s recommendation to hold the investment in YES to his severe detriment.
It is alleged that Wittenberg did not fully appreciate the risks and characteristics of the very investment he recommended and sold to the Erez Law client. The client incurred significant losses in the UBS YES program. Contrary to Wittenberg’s representations, the YES program sustained staggering losses in December 2018 when volatility increased.
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.