Firm Accused of Inadequate Training And Poor Supervision of Brokers That Sold YES
UBS Financial Services has consented to pay about $25M to settle US Securities and Exchange Commission (SEC) charges related to the firm’s Yield Enhancement Strategy (YES). The regulator contends that the broker-dealer, which marketed and sold $2B of UBS YES to about 600 high-net-worth individual investors between February 2016 and February 2017, allegedly failed to adequately train its financial advisors in and supervise this complex iron condor strategy.
This purportedly included the firm knowing about— documenting—the “possibility of significant risk” but not notifying many of its brokers and clients about this.
Advisory firms must put into effect the appropriate policies and procedures to ensure everyone involved in buying complex investment products and strategies clearly understands such risks. Without denying or admitting to the SEC’s findings, UBS:
- Consented to the regulator’s order that it violated sections of the Investment Advisers Act of 1940 and Rule 206(4)-7.
- Agreed to censure and the cease-and-desist order.
- Will pay a $17.4M civil penalty, $5.8M of disgorgement, and $1.4M of prejudgment interest.
Unfortunately, YES program investors are estimated to have lost over $1B after their UBS brokers recommended they become involved in the firm’s yield enhancement strategy. Many clients contend that they thought they were investing in a conservative options trading strategy that would provide not only diversification but also stable, incremental returns. Instead, they were blindsided by the losses that have reached as high as millions of dollars for some of them. According to the Commission, many UBS financial advisors also expressed surprise at these losses.
Our seasoned UBS YES investment lawyers represent number of these high-net-worth individual investors in Financial Industry Regulatory Authority (FINRA) arbitration against UBS Financial Services. We are helping clients pursue damages and fight to recover their losses.
What Is UBS YES?
UBS YES is an options overlay strategy set up to create income from an existing portfolio of securities. Customers with a net worth of $5M or greater can use their portfolio as collateral, which is like taking a margin loan against current holdings and borrowing against them to trade options. The YES program was supposed to increase yields without overexposing underlying assets. By 2018, YES holdings had reached around $6B. Find out more about this Yield Enhancement Strategy.
SSEK Law Firm Partners and UBS YES program lawyer Sam Edwards:
UBS clients thought this was a low-risk option compared to traditional investment strategies. All the more reason why they were so shocked when, during a time of great volatility in late 2018, the Yield Enhancement Strategy suffered an 18% loss. This was approximately $750M of investors’ funds. Their losses would continue.
Meanwhile, UBS and over 6,500 financial advisors, led by a group of New York brokers in the firm’s wealth management unit, were making over $100M annually from marketing and selling YES. The SEC contends that while UBS financial advisors did not comprehend the risks during the period at issue, others were aware of them but believed this was a “profit opportunity under a hurricane insurance analogy.”
The regulator claims that there are clients who never would have invested in UBS YES had they fully comprehended the “significant downside risk” and also that their brokers would never have recommended this program if they too had understood this. Regardless, UBS can and should be held liable for investors’ losses.
Skilled UBS YES Law Firm
Over the years, SSEK Law Firm has successfully pursued many FINRA arbitration claims against UBS Financial Services on behalf of our clients. In August 2021, our investment laqyewrs won a $400K award on behalf of two Maryland investors who suffered Yield Enhancement Strategy losses.
To schedule your free, no-obligation case consultation, call (800) 259-9010 today.