UBS YES Complaints Continue to Mount Up

UBS Yield Enhancement Strategy Lawsuit "FINRA": Jose Cornide Complaint

An investment strategy designed to maximize the probability of returns while minimizing risk? Haven’t we heard that before?  Minimizing risk while delivering consistent returns is exactly what UBS’s Yield Enhancement Strategy (YES) set out to do, with its supposedly low connectivity with any single stock or even the market at large.

But real life often turns out different from our plans which often go awry.

The Yield Enhancement Strategy (YES)

What was the YES Strategy?

On the surface, it was a secure managed-options scheme offered to the firm’s wealthiest and most experienced clients. In reality, it now appears most advisors selling it did not completely understand how it worked.

Some investors have managed to find a correlation between returns and the market staying within pre-set levels.

There was a period in 2018 when volatility was high in the market. This was followed by a collapse. The market dropping beyond the parameters defined in YES seems to have taken the bottom out of the investments in YES, leading to considerable losses. Investors were also called upon to contribute additional funds to cover the margin calls.

The one aspect that remained consistent during this period is the generation of commissions for the firms and brokers selling the YES strategy. Their earnings were not linked to customers earning or losing money. It appears that UBS advisors continued to sell YES even after the bottom had dropped out of it.

Understandably, having lost significant amounts in their YES investments, many investors are asking questions. The YES strategy had been developed by a set of four Credit Suisse investment advisors who, at a point, moved en masse to UBS, bringing the strategy with them.

Margin calls

It does emerge that some parts of the strategy involved buying on margins, which, in itself, is a common trading strategy. When the market drops, a customer may be required to fund his account to avoid securities being sold to cover the shortfall, and continue trading.

In essence, it permits purchasing stocks without having cash, on the strength of the value of stocks you already hold in your account. It could be considered similar to taking a loan against the collateral security of your shares and buying more shares with that money.

Margin trading increases a customer’s leverage and could expose him to the need for funding margin calls in a falling market, failing which he could lose the stock held as collateral. It is a strategy that is recommended for experienced investors.

Investor recourse

The Financial Industry Regulatory Authority (FINRA) makes available an arbitration process for investors seeking compensation. Several investors have resorted to FINRA arbitration and some to civil suits against UBS and Credit Suisse in pursuit of recovery of losses. Some have already yielded results:

  • A Houston, TX investor was able to recover the entire amount of $358K sought in damages. He did not, however, get compensation for interest, costs and fees.
  • $800K was awarded to two couples through a FINRA arbitration claim.

In some cases, UBS was successful in defending itself. In several others, investors received awards, but not to the full extent of damages requested.

Haselkorn & Thibaut, P.A., a nationally recognized investor law firm, acts on behalf of investment fraud victims and represents them not only in federal and state courts but in arbitration claims as well. Our work has involved stockbroker misconduct-related cases against the most celebrated Wall Street firms.

If you are an investor, we encourage you to contact us for information that might help us in the cases we are currently investigating. We also invite you for a consultation if you believe you have lost money on account of broker misconduct. You can reach us at 1-800-856-3352.

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