Written by The White Law Group• September 17, 2021• 6:50 pm• Blog, Current Investigations

FINRA Award: UBS to Pay Investors $358,000 for YES Strategy

FINRA Award: UBS to Pay Investors $358 K for YES Strategy

According to a FINRA award posted this week, a three-person arbitration panel has ordered UBS Wealth Management USA to pay Houston resident almost $358,000 in damages tied to a UBS YES (Yield Enhancement Strategy), an options-spread strategy that went south during market volatility.

Amid a mountain of claims involving the UBS YES strategy, this is reportedly the first time that the claimants have won the full amount of their damage claims, according Advisor Hub.

Daniel Ferber, the claimant, reportedly accused his advisors and UBS of misrepresenting the downside risk and amount of leverage associated with the strategy, in its marketing materials. The strategy was pitched as a low-risk way to generate an additional 3% to 4% per year for customers but UBS did not disclose the investors could lose as much as 35%, according to the article.

Eight of the 13 arbitration awards issued in UBS YES suits were reportedly denied, while in five, the investors received less than the total damages they had sought, according to the article.

In this particular case, the arbitrators denied an expungement request from two Houston brokers, who were not named as respondents in the case, but also denied the claimant’s request for attorneys’ fees and interest.

UBS last month was ordered to pay another claimant $300,000 in separate YES options claim, although the damage amount requested was between $482,000 to $1.14 million, according to Advisor Hub.

A few days earlier another claim — this one for $4 million – was reportedly denied by a three-person panel, who also ordered the complaints expunged from the brokers’ records.

UBS brokers reportedly marketed the Yield Enhancement Strategy, or YES, to wealthy clients. During times of low market volatility, the strategy generated positive returns, but at the end of 2018, when market volatility increased, huge losses resulted. Because the program used borrowed money, investors had to either add additional money when trades went down or sell their positions at a loss. In August 2019, UBS was reportedly facing more than two dozen claims by disgruntled investors.

Potential Lawsuits to Recover Financial Losses

Broker dealers are required to perform adequate due diligence on all investment recommendations. They must ensure that each investment recommendation that is made is suitable for the investor in light of the investor’s age, risk tolerance, net worth, financial needs, and investment experience.

If a broker or brokerage firm makes an unsuitable investment recommendation or fails to adequately disclose the risks associated with an investment, they may be found liable for investment losses in a FINRA arbitration claim.