Articles Tagged with UBS Financial Services

Investors in supposed “Yield Enhancement” strategies are learning that the purported safe investment program has significant risk. The Yield Enhancement Strategy (YES) that UBS Financial Services, Inc. (UBS) and other brokerage firms used was marketed as a “safe and efficient” way to enhance the return on a conservative portfolio.

The YES program was represented as an investment program that involved using options strategies that produced small returns but with small risks. UBS is one of a number of brokerage firms that touted the YES approach to customers as a way to make money via the “strategic” buying and selling of SPX index options spreads. The returns were purportedly “incremental” to “underlying asset returns” while giving clients a chance to possibly make money from low yield assets.

Seeking Alpha reports that the brokerage firm told clients that their UBS Yield Enhancement Strategy involved allowing a “mandate” or margin to be placed against their respective portfolios and that this would then be used, via an “iron condor” options trading strategy, to generate returns. It was these particular investors that have sustained the greatest losses when excessive volatility in December—the most that the market has encountered in 30 years—caused the YES strategy to fall.

Ex-Merrill Lynch Broker Will Pay $5M Penalty and Serve Time In Prison

A federal judge has sentenced Thomas Buck, an ex-Merrill Lynch broker, to 40 months in prison. Buck pleaded guilty to securities fraud in 2017. As part of his plea, he admitted to lying to Merrill about telling clients about their account options, and, at certain times, making trades for them without getting their approval.

That year, the US Securities and Exchange Commission (SEC) had filed a complaint against Buck accusing him of making over $2.5M in excessive commissions and fees from more than four dozen clients. The SEC contends that Buck placed clients into accounts that charged them commissions instead of ones that were fee-based and not as costly. The regulator also accused him of making unauthorized trades. The Commission barred the former Merrill broker from the investment advisory and brokerage industries last year.

Prosecutors in Malaysia have filed criminal charges against a number of Goldman Sachs Group Inc. (GS) units and several people over a massive multibillion-dollar  bond fraud involving the sovereign wealth fund the 1Malaysia Development Berhad (1MDB). The individuals charged including former Goldman managing directors Roger Ng Chong Hwa and Tim Leissner, financier Jho Low, who is accused of masterminding the fraud, and ex-1MDB general counsel Jasmine Loo Ai Swan.

Malaysia Attorney General Tuan Tommy Thomas said that the criminal charges are related to fake and misleading statements issued in order to steal $2.7B from the proceeds of three 1MDB subsidiary issued-bonds. The bonds, which Goldman organized and underwrote, were valued at over $6B.

The defendants are accused of conspiring together to bribe public officials in Malaysia so as to allow for Goldman’s involvement with the bonds. The investment bank earned about $600M in fees for its work with the Malaysian sovereign fund.

Jose G. Ramirez-Arone Jr. (also known as Jose G. Ramirez, Jr.), a former UBS Financial Services of Puerto Rico (UBS-PR) broker, has pleaded guilty to criminal charges accusing him of defrauding investors while making over $1 million in improper commissions through the sale of Puerto Rico closed-end funds. Ramirez-Arone is scheduled to be sentenced next year.

The former UBS broker, known to many on the island as “Whopper,” and UBS Puerto Rico have together been the subject of dozens of Financial Industry Regulatory Authority (FINRA) arbitration complaints brought by customers claiming they sustained massive investment losses because not only did UBS and Ramirez-Arone sell the customers Puerto Rico bonds while misrepresenting the risks, but also, the finer broker recommended that they borrow money to purchase even more of these securities when they could not afford them.

Ramirez-Arone was one of the top-selling brokers at UBS Puerto Rico. In his guilty plea, Ramirez-Arone admitted that he was involved in a scam to help his UBS customers fraudulently obtain non-purpose credit lines, which was a violation of the firm’s policy. The credit lines came from UBS Bank USA, which is a UBS Financial Services subsidiary based in Utah. According to the U.S. Department of Justice, Ramirez-Arone took advantage of the low interest rates at UBS bank to convince his customers to buy additional shares of UBS’s Puerto Rico closed-end funds (CEFs). The former UBS broker acknowledged being a part of a scheme that involved recommending to different clients that they take money from the UBS Bank credit lines to invest to in the UBS Puerto Rico closed-end bond funds. Since using a “non-purpose” loan to buy additional securities is not allowed, Ramirez-Arone admitted advising customers to misrepresent on their credit line application what they intended to use the credit line and having the clients take the borrowed money to their retail bank and then bring the money back to UBS to buy more securities.

UBS Financial Services, Inc. (UBS) and two investors will now arbitrate a Puerto Rico closed-end bond fraud lawsuit accusing the investment arm of the Swiss bank of improperly structuring investments. The plaintiffs, Augusto Schreiner and Nora Fernandez, contend that UBS, its Puerto Rican subsidiaries, firm executives, and Banco Popular de Puerto Rico failed to suitably examine nearly two dozen closed-end mutual funds that held the beleaguered island’s government bonds.

Schreiner and Fernandez were initially part of an attempt to file a class action lawsuit against UBS and its subsidiaries. However, last month, US District Court Judge Sidney H. Stein refused to grant the case class certification status.

The Court found that because all of the plaintiffs had different investment objectives, they would not be able to demonstrate that the mutual funds were unsuitable in general. Judge Stein ruled that it was up to each investor to prove individually, according to their respective needs, objectives, and ability to handle risk, that UBS had neglected to properly analyze the risks that came with the funds.

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