Over the last several months, it has come to light that brokers from some of the largest firms on Wall Street firms sold Collateral Yield Investment Strategies (CYES Strategies) that may not have been suitable for many investors, causing them to suffer devastating losses. Offered through registered investment adviser Harvest Volatility Management, LLC, the CYES Strategy is a type of Yield Investment Strategy (YES Strategy), only even more risky and complex.
YES Strategy Investments
Reportedly, UBS (UBS), Credit Suisse (CS), Bank of America’s (BAC) Merrill Lynch, Morgan Stanley (MS), and other brokerage firms brokers sold YES Strategies to many wealthy investors, touting the approach as safe way to increase returns on conservative portfolios. These were supposed to be small returns at a low risk, using a strategic approach that involved the purchasing and selling of SPX index options spreads.
Yet when the market experienced what has been touted as the most volatility it has encountered in three decades last December, YES Strategy investors were blindsided by how much money lost, in part because many of them were completely unaware that they had taken on that much risk to even make them vulnerable to such losses. There have also been questions raised since then about whether many YES Strategy investors even met the criteria to be able to use this investment approach to begin with.
Meantime, broker-dealers and their registered representatives reportedly continued to sell the YES Strategy to clients, even after, according to Seeking Alpha, some investors lost over 20% on their portfolios in the wake of the year-end volatility.
If you are a YES Strategy investors who suffered such losses and you feel that you were not apprised of the risks involved, or this investment may not have been suitable for you from the get-go, you may have grounds for a broker fraud claim to recover your losses.
CYES Strategy Strategy Investments
As for the CYES Strategy, the reason that this is an even more risky investment than the YES Strategy is because it depends on an iron condor approach involving four options written simultaneously on the same index, with the same expiration dates, while using different strike prices. While the account holder retains all the premiums when the index remains stable, during periods of market volatility, the premiums placed on options may not be enough to cover resulting losses. CYES Strategy investors may even be at risks of losing their entire capital. Fidelity, Jefferies, Merrill Lynch, Morgan Stanley, and Charles Schwab are among the firms that reportedly have sold CYES Strategy investments to clients.
However, any type of YES Strategy should only be bought by investors that can handle a high degree of risk and volatility. This usually means that typically, YES Strategy investors should not only be wealthy, but rich enough that they can commit to a minimum of over $1M in their portfolios to weather any potential losses.
YES Strategy Investor Fraud Lawyers
Over the years, Shepherd Smith Edwards and Kantas, LLP (SSEK Law Firm) has handled a number of Yield Enhancement Strategy cases for investors. Our YES Strategy lawyers and CYES Strategy attorneys have been meeting with investors nationwide to help them determine whether they have grounds for a claim. Contact SSEK Law Firm today so we can help you explore your legal options.