UBS Financial Services (UBS) recommended the Yield Enhancement Strategy (YES) to its high net-worth customers. UBS financial advisers across the country recommended the high-risk program to many high net-worth clients and presented YES as a safe way to earn additional income by using existing assets at UBS as collateral.
Erez Law believes that the UBS YES strategy was, in fact, an aggressive options strategy. Unfortunately, many UBS brokers did not adequately understand and/or disclose the risks associated with this type of high-risk investment program.
Investors seeking recourse for losses in YES investments are required to file their disputes in FINRA arbitration. Investors have retained Erez Law to file FINRA arbitration claims against UBS to recover their losses.
At Erez Law, many of our clients come to us because of our specialization in recovering investment losses. We use considerable legal resources to help investors who trusted reckless and unethical brokers. We have filed many FINRA arbitration cases against large brokerage firms, including Merrill Lynch, Morgan Stanley, and UBS, among others, holding these firms accountable for dishonest investment advisory practices, unsuitable recommendations, misrepresentation, and over-concentration in investments and strategies.
If you invested in YES without understanding the risks associated with your investment, you may be able to recoup your losses. Our team of financial securities attorneys has experience with FINRA arbitration, and we know how to hold brokerage firms and advisers liable for their indiscretions. Contact our firm by calling (888) 840-1571 to speak with one of our attorneys.
UBS YES Investment Losses and Decline
UBS offered the high-risk YES program to its customers whose net worth was at least $5 million. According to claims filed by Erez Law, UBS’s YES program was represented to investors as a low-risk strategy that allowed them to generate enhanced yield, all without requiring investors to deposit additional funds into their UBS account.
Erez Law has alleged that contrary to UBS’s presentation of YES, the strategy did actively engage in market timing and taking directional positions on the market and suffered significant losses as a result. The YES program generated substantial fees for UBS. UBS may have received an annual investment advisory fee of 1.75% on its customers’ mandate in YES.
UBS presented its YES program as employing a “market neutral” options strategy known as an “iron condor,” named for the strategy’s profit/loss diagram. However, it is alleged that this was not the case and posed a significant risk for investment portfolios, especially those that were over-concentrated in these securities.
UBS’s marketing materials emphasized that the YES program minimized the risk of losses by providing investors with downside protection in market volatility. It also noted that UBS would “manage risk” and “minimize losses” by hedging and actively monitoring the position. UBS also represented to its clients that the YES program had “excellent risk metrics” and would allow its clients to increase returns, while at the same time reducing risk.
UBS’s YES program involves using the equity in an investor’s UBS account to pursue a purportedly low-risk options strategy involving a combination of put and call options on the S&P 500 index. 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. This is a strategy that should only be for sophisticated investors that seek a highly complex options strategy.
An iron condor strategy seeks to generate income through the sale of “out-of-the-money” put and call options contracts, while providing hedging against losses through the purchase of further out-of-the-money put and call options on the same asset to limit the investor’s downside risk. The iron condor strategy is intended to be a market-neutral strategy, which means that it is not a directional wager that the price of the underlying asset will increase or decrease in value. Rather, the strategy seeks to profit from a relative lack of volatility in the price of the underlying asset.
In other words, the investor is betting that the underlying asset’s price will remain within a specified trading range, allowing all of the options to expire worthlessly. At this time, the investor retains the premiums received from the sale of the options (minus the cost of purchasing the options that were used to limit the downside exposure). If 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, UBS’s program advisory fees would also reduce the investor’s profits.
UBS YES performed when there was little market volatility. However, when the stock market faced times of volatility, the strategy caused investment losses. Unfortunately, it is alleged that UBS brokers did not adequately disclose the risks associated with this type of high-risk investment.
Investors in UBS YES sustained significant losses. In December 2018, YES declined by -13.5% and returned -18.65% in 2018. In 2019, YES declined by -2.17%. In the first half of 2020, YES declined by -13.52%. Erez Law believes that these losses and the source of the losses is contrary to way UBS represented it would manage the program.
The UBS YES program grew to between $5-6 billion in assets under management.
Merrill Lynch, Credit Suisse, Morgan Stanley, and other brokerage firms across the country offered similar investment strategies.
Recovering Losses Through FINRA Arbitrations
Investors in the United States have filed FINRA arbitration claims against UBS for investments made in YES investments on the advice of their brokers. Many of these investors were not adequately warned about the high-risk nature of the investments, and have suffered severe losses as a result. Investors may have a claim against the brokerage firm based on misrepresentation, unsuitability, breach of fiduciary duty, and state and federal securities laws.
A broker must have reasonable grounds for each recommendation made to investors, considering such factors as the customer’s other securities holdings, financial situation, and risk tolerance. In addition, before a financial advisor recommends security, the financial advisor must conduct due diligence, investigating the facts surrounding the security, to confirm that it is suitable for the customer. The suitability of an investment for a particular individual is at the center of the investment process, and one of the key duties owed by a broker to the customer. A firm may be held liable for its broker’s failure to recommend suitable investments to its customers.
In addition, 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, the brokerage firm may be liable for investment or other losses suffered by brokers who worked for the firm.
Erez Law Has Already Filed Cases Against UBS to Recover YES Losses
Erez Law recently filed FINRA arbitration claims on behalf of UBS customers for YES investment losses.
- Erez Law Files Claims for UBS Financial Services YES Investment Losses with Broker Jose Cornide
- Erez Law Files Claim for UBS Financial Services YES Investment Losses with Broker Eric Wittenberg
- Erez Law Files Claim on Behalf of Former Client of Christopher Aitken and Ken Tonning for UBS YES Investment Losses
- Erez Law Files Claim for UBS Financial Services YES Investment Losses with Broker Allan Klenke
Collateral Yield Enhancement Strategy (CYES) Investment Fraud
Did your Merrill Lynch financial advisor recommend you invest in a Collateral Yield Enhancement Strategy (CYES strategy) and not adequately disclose the risk associated with this investment? The CYES is managed by Harvest Volatility Management, LLC. Merrill Lynch brokers across the country sold CYES strategy investments that resulted in significant losses for their clients. The CYES strategy was a high risk options investment strategy. Investors Have Recourse to Recover Losses in YES Investments
Contact Us for a Free Consultation
If you have experienced investment losses as a result of investing in the UBS YES or Merrill Lynch CYES, we are here to help. We are not afraid of taking on corrupt firms, and we can and will combat some of the largest brokerage firms in the United States. Count on our experience to successfully take you through the FINRA arbitration process.
Please call us at (888) 840-1571 for a free consultation or complete our contact form to investigate your recourse for losses in YES and CYES investments. Erez Law is a nationally-recognized law firm representing individuals, trusts, corporations, and institutions in claims against brokerage firms, banks, and insurance companies. If you have more questions about investment fraud, you can visit our securities fraud frequently asked questions page, or contact our firm to speak with one of our qualified fraud attorneys.