$400K UBS YES FINRA Arbitration Awarded to Investors in Baltimore, Maryland
In one of the first in-person arbitration in the last 18 months, a Financial Industry Regulatory Authority (FINRA) arbitration panel has awarded two investors $405K in their UBS Yield Enhancement Strategy claim against UBS Financial (UBS).
Shepherd Smith Edwards and Kantas (SSEK Law Firm at investorlawyers.com) represented these UBS YES strategy investors in their FINRA arbitration case, which was heard in Baltimore, Maryland.
Our securities law firm is also continuing to fight for other Yield Enhancement Strategy customers in recovering their losses. If you are one of these investors, call our investment fraud attorneys at (800) 259-9010 today.
UBS Investors Sought Marginally Higher Yield, Instead Suffered Losses
The claimants in this UBS YES strategy lawsuit invested in the program at the recommendation of the firm and its financial advisors. UBS Financial markets its yield enhancement strategy as a way for investors to achieve “incremental” gains on their existing portfolio while supposedly taking limited risks.
In their FINRA arbitration case, the investors accused UBS of a number of causes of action, including:
- Breach of fiduciary duty
- Unjust enrichment
- Breach of contract and warranties
- Promissory estoppel
- Abuse, neglect, and exploitation of elderly persons and disabled adults.
The investors contend that UBS’ options traders that implemented the YES program did so in a manner that was in conflict with how this trading strategy was marketed. Therefore, the risk controls were inadequate as a result.
Unfortunately, these two investors are not the only ones who had no idea how much risk or volatility they were agreeing to take on when they got involved in the UBS YES investment program.
Many were told during sales pitches and in marketing material that not only was the program safe for investors wanting “preservation of capital” but also, investors could expect to earn income regularly. For many, UBS YES was pitched as a way to supplement retirement income. However, given the volatility and lack of reliability of this trading strategy, there is no question it was not suitable to recommend as a retirement income alternative.
Risks Involving UBS YES Strategy Were Misrepresented
UBS YES borrows against the existing holdings of clients to trade options. Those options were supposed to be traded in a safe way with significant protections against loss, but the YES program instead made large bets on the stock market while consistently representing to investors that this program was:
- Not market dependent
- Was not directional
Although marketed to wealthy customers, many of those to whom the broker-dealer recommended this program were not fully apprised of the risks involving this complex, risky managed options overlay strategy (also known as the iron condor strategy) that was promoted as safe and market-neutral.
In fact, the UBS YES program has been easily affected by significant market moves, such as in December 2018, February 2020 and March 2020. This caused many UBS investors substantial losses. Yet, those predictable events did not stop the broker-dealer from explaining away what occurred as a “black swan” incident while reassuring investors that they could get back losses in a short time period.
Unfortunately, that did not happen. Instead, even while the market rallied in 2019, this options overlay strategy lost additional value for UBS clients and then in the Spring of 2020, with the onset of COVID-19, investors were again surprised with massive losses.
UBS and Its Brokers Made Millions As YES Investors Lost Millions
At one point in mid-2018, the group of UBS traders responsible for overseeing this program had around $6 billion in mandates for client accounts. The broker-dealer, which charged customers as much as 1.75% in yearly fees on all of their YES borrowings even when the entire amount wasn’t used, earned almost $100 million annually. Clients also paid other fees on underlying assets.
Many UBS YES investors appear to have sustained six- to seven-figure losses. In fact, in December 2018 alone, the brokerage firm lost more than $700 million of its investors’ savings as a result of the collapse of its yield enhancement strategy that month.
Seasoned UBS YES Investor Attorneys
For over 30 years, SSEK Law Firm has been zealously advocating for investors in FINRA arbitration, litigation, and mediation. We have represented thousands of clients, obtaining many millions of dollars of financial recovery on their behalf.