UBS Yield Enhancement Strategy (YES) Investor Lost 20%, But Wins $470K FINRA Claim

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UBS is once again at the receiving end of a ruling by the Financial Industry Regulatory Authority (FINRA) in a case regarding their Yield Enhancement Strategy, also known as YES, an options trading strategy created by the firm. In this particular case, they have been asked to pay $470K to the claimants who sought damages for losses incurred.

Case details

The case was filed by the Barbara M. Estay Trust through its trustee Barbara Estay and accused the firm of several violations connected to the strategy, which included misrepresentation, fraud, unsuitability, and negligence, as revealed in an award document published by the self-regulating organization (SRO). It was filed in April of 2020.

FINRA also advises that through the case, filed in April 2020, an amount of around $725,000 was sought by Estay in total damages, which included, apart from compensatory damages, lawyers’ fees and other expenses.

UBS has been ordered by the FINRA panel to pay Estay:

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  • Compensatory damages – $343,389 
  • Costs – $24,169
  • Lawyers’ fees – $100,568

The request made by UBS to expunge the claim from the records of Gerard Costello and Henry Jakobsze, both UBS brokers, “and any and all associated persons who may be affected by this claim,” who were not named in the claim, was also denied by the panel.

The panel deemed the request for expungement to be withdrawn while adding that it, the request for expungement, was not pursued by UBS on behalf of “any and all associated persons who may be affected by this claim.” No further explanation was forthcoming from the arbitrators on the same.

The YES program

The program was conceptualized by UBS with the aim of reducing exposure for clients in times of market volatility.

It involved the placement of multiple option trades at different strike prices but with the same date of expiration. Beginning in December 2018, customers who had opted for the scheme suffered substantial losses.

UBS has had a slew of claims filed against them by investors for recovery of losses as a result of the strategy and paid out millions of dollars in compensation. At the same time, they have also been on the winning side in about half of the filed claims.

In June, a $25 million settlement was reached between UBS and the Securities and Exchange Commission earlier this year on account of fraud allegations tied to the strategy.

Investors in the UBS Yield Enhancement Strategy (YES) lost more than 20% of their capital in December.

Investors in the UBS Yield Enhancement Strategy (YES) lost more than 20% of their capital in just December, which could have been close to $1 billion. Although UBS acknowledges that market fluctuations affected the strategy, it insists that it fully disclosed all risks to clients. Many investors are still convinced that the technique is viable despite the recent losses.

Investment claims losses

A low-risk investment approach called the UBS Yield Enhancement Strategy employs options to boost profits. When the price of the underlying security fluctuates in opposition to investors’ expectations, this method, however, can also lead to large investment losses. The company introduced the method in 2015 and marketed it as a conservative, low-risk alternative to standard investment strategies.

A company within UBS called Flatiron Partners, which specializes in investment management, created the investment plan at the beginning. On BrokerCheck, there are more than twenty consumer complaints against the brokers at Flatiron Partners, and many of these cases are still open. Although UBS makes an effort to control the risk involved in this investment approach, many clients who invested in the YES experienced significant losses.

The UBS Yield Enhancement Strategy was not only market neutral, but also unsuitable for the majority of retail investors. Therefore, it is imperative that you get in touch with an experienced investing misconduct lawyer if you have invested in this method.

Commissions for affirmative votes

The commissions UBS charged for its UBS Yield Enhancement Strategy have become the subject of an investigation (YES). Investors are offered this complicated financial instrument, which frequently has a high level of risk and additional charges, by financial advisors. Additionally, it has been observed that financial advisors frequently attempt to transfer “dead money” accounts into more lucrative but frequently inappropriate products. Option purchases made as part of the UBS YES program most certainly carried bid-ask spreads that resulted in significant effective expenses for program members.

The Yield Enhancement Strategy of UBS was originally presented to the private banking division of Credit Suisse’s financial advisors in 2004. Since then, as more investors have lost money, the method has come under under scrutiny from Wall Street institutions.

Both Credit Suisse and UBS launched the UBS YES investment approach to investors, positioning it as a low-risk alternative to more conventional investing. But the YES technique has caused numerous investors to lose millions of dollars. This is due to the fact that schemes for yield enhancement frequently include several fee-generating call and put options. Additionally, brokerage houses can still make money even if the investment is unsuccessful.

False claims regarding YES were made

A class action lawsuit against UBS that claimed the company misled investors about its YES strategy has been settled. Iron Condors were actively managed as part of this investing strategy in an effort to boost customer account yields. But UBS struggled to convince potential investors that the technique carried a significant level of risk.

UBS has been held accountable for investors’ losses due to the high level of risk associated with this investing strategy. A UBS arbitration award may provide investors with up to $3.9 million. The sum that investors can recoup, however, will depend on the type of investment losses. Investors may also be entitled to attorney’s costs in addition to monetary damages. To protect their interests, investors should hire knowledgeable legal counsel.

Fatemi’s criminal history and HPL’s refusal to file a new IPO in 2000 were not disclosed by UBS analysts. A co-author of the HPL upgrading study was the analyst. He was worried about the improvement, though. It was a “gutsy call,” he said, describing it to lead analyst Byron Walker.

Market volatility and turbulence

Although the Yield Enhancement Technique (YES) from UBS is a good investing strategy for highly experienced investors, many retail investors lack this level of expertise. Due to the assumption of low volatility, the investing strategy is not suitable for all investors. Investors should also keep their risk to a minimum, particularly in erratic markets.

Advisors at Credit Suisse’s private banking division were first made aware of UBS’s Yield Enhancement Strategy in 2004. UBS saw a rise in lawsuits during the most recent market turbulence and stopped providing the strategy to its investors.

Many of its rich clientele suffered millions of dollars in losses as a result. The UBS Yield Enhancement Strategy is thankfully no longer available. You can, however, get in touch with Rosca Scarlato LLC to find out more about your legal alternatives.

A recent arbitration panel found that UBS failed to inform its clients of the risk associated with its yield enhancement strategy. Many UBS clients lost money despite the firm’s claims that this investment method was secure. Many of them claim that UBS misrepresented the risks in complaints they submitted to the Financial Industry Regulatory Authority (FINRA).

UBS is being sued over the word “yes.”

Losses incurred since investing in the investment plan are being sought after by the plaintiffs in a lawsuit brought against UBS over YES. The plaintiffs claim that the UBS adviser team misled them. They assert that the UBS staff failed to disclose its YES account to them before to the transaction and was opaque regarding conflicts of interest. The lawsuit’s response from UBS declares that it will fight the allegations in court.

Plaintiffs claim that UBS concealed losses, particularly the rapid losses endured by YES customers, and failed to communicate risks. The plaintiffs also claim that UBS personnel exaggerated the dangers associated with the YES investment plan. Additionally, they contend that UBS concealed the consultants who handled the investment plan and who were all former Credit Suisse employees.

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