Did you lose money investing in UBS YES Program (UBS Yield Enhancement Strategy Program)?
Galvin Legal, PLLC is launching an investigation on behalf of investors who suffered losses investing in UBS YES Program (UBS Yield Enhancement Strategy Program) at the recommendation of their financial advisor. If you suffered losses investing in the investment, then Galvin Legal, PLLC may be able to help you recover your losses in a Financial Industry Regulatory Authority (“FINRA“) arbitration claim against the brokerage firm that recommended the investment.
If you suffered losses and would like a free consultation with a securities attorney, then please call Galvin Legal, PLLC at 1-800-405-5117.
About the UBS YES (UBS Yield Enhancement Strategy Program)
The UBS YES (UBS Yield Enhancement Strategy Program) strategy is an options strategy that UBS marketed as “market-neutral.” The strategy was introduced to UBS by a team hired from Credit Suisse in 2015 and was sold to investors as a bond portfolio enhancer. The options strategy at worst had a “defined maximum loss” that would be limited to premiums paid, according to reports issued to investors.
According to an article in the Wall Street Journal, the strategy “effectively borrows against clients’ holdings at UBS and uses the proceeds to trade options. The product is akin to a margin loan against existing holdings; losses could compel an investor to put in extra cash or securities.” The article further states that “although clients say UBS financial advisers told them the strategy was conservative, in reality it often embedded risky bets that markets would stay placid–gambles on which many investors lost 20% or more. The Securities and Exchange Commission is looking into how it was marketed.”
A 2017 market brochure said the strategy “seeks to limit exposure to significant upside or downside market moves” and could “generate additional cash flow from lower yielding assets.” Yet the program’s six-page account agreement states that it is “aggressive and carries a high degree of risk,” adding that clients could “lose the principal invested.”
Portfolios using the strategy plummeted when the S&P 500 lost approximately 11% in December 2018. UBS removed the strategy from its website in August 2019, a sign that the firm is no longer issuing the investment. The UBS YES (UBS Yield Enhancement Strategy Program) strategy involved the use of an “Iron Condor” options strategy, which involves selling both near-the-month and out-of-the-money put and call options against the S&P 500 index, NASDAQ, and other primary indices.
If you suffered losses and would like a free consultation with a securities attorney, then please call Galvin Legal, PLLC at 1-800-405-5117.
The strategies problems began in 2018 when fluctuations in the S&P 500 index reached highs of 2,929 and lows of 2,350. The most volatile period was between October and December 2018, when the market declined by approximately 20% followed by a rebound of approximately 12% through January 2019.
When the market swings sharply, “Iron Condor” and other options strategies can expose investors to severe losses. The violent swings caused the premiums of both the put and call sides of the “Iron Condor” strategy to spike, leading to losses on both sides of the trade.
UBS charged up to 1.75% in annual fees on the full amount of YES borrowings–often a third to a half of a customer’s holdings at UBS. For example, if a client authorized a $5 million maximum for YES, but only $3 million was used, UBS would still charge the YES fees on the full $5 million. Those charges were layered on top of any fees clients may already have been paying on the underlying assets.
The UBS YES (UBS Yield Enhancement Strategy Program) strategy was created in 2004 for advisors at Credit Suisse’s private banking group and was introduced to UBS by Matthew Buchsbaum and Scott Rosenberg, who joined in November 2015 after Credit Suisse said it was closing its U.S. brokerage operations. Matthew Buchsbaum’s and Scott Rosenberg’s FINRA BrokerCheck records are splotched with 25 and 17 customer disputes, respectively.
Many of the large brokerage firms, including UBS Financial Services, Merrill Lynch, Credit Suisse, and Morgan Stanley offered the strategy to their clients. Unfortunately, many of their representatives failed to adequately disclose the risks associated with this type of strategy to their clients.
If you suffered losses and would like a free consultation with a securities attorney, then please call Galvin Legal, PLLC at 1-800-405-5117.
Due Diligence Requirement
FINRA requires brokerage firms to conduct due diligence on investments and to conduct a suitability analysis when recommending securities to a customer that takes into account the customer’s knowledge and experience. FINRA Rule 2111(a) states that “a member or an associated person must have a reasonable basis to believe that a recommended transaction or investment strategy involving a security or securities is suitable for the customer, based on the information obtained through the reasonable diligence of the member or associated person to ascertain the customer’s investment profile. A customer’s investment profile includes, but is not limited to, the customer’s age, other investments, financial situation and needs, tax status, investment objectives, investment experience, investment time horizon, liquidity needs, risk tolerance, and any other information the customer may disclose to the member or associated person in connection with such recommendation.”
Rule 2111 is composed of three main obligations: reasonable-basis suitability, customer-specific suitability, and quantitative suitability. Brokerage firms that fail to conduct adequate due diligence on investments they recommend, such as UBS YES Program (UBS Yield Enhancement Strategy Program), or that make unsuitable recommendations can be held responsible for the customer’s losses in a FINRA arbitration claim.
If you suffered losses and would like a free consultation with a securities attorney, then please call Galvin Legal, PLLC at 1-800-405-5117.
Request a Free Consultation with a Securities Attorney
If you suffered losses investing in UBS YES Program (UBS Yield Enhancement Strategy Program) and would like a free consultation with a securities attorney, then please call Galvin Legal, PLLC at 1-800-405-5117.
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