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Written by 12:05 pm Blog, Securities Fraud Articles

Securities Investigation involving UBS’s V10 Enhanced FX Carry Strategy

According to reports, a lawsuit was recently filed  against UBS Group for selling its V10 Enhanced FX Carry Strategy product without allegedly explaining the risk and complexity of the investment.

The lawsuit reportedly further alleges that UBS’s V10 Enhanced FX Carry Strategy was pitched as a high-yielding foreign-exchange investment that used computer algorithms to minimize the risk of losses in periods of volatility.

To compound matters for investors in this product, now investigators at the Department of Justice are reportedly examining whether UBS traders shortchanged investors in UBS’s V10 Enhanced FX Carry Strategy by overcharging them when they carried out the currency trades needed to execute the strategy.

The White Law Group is investigating the liability that brokerage firm’s may have for recommending this risky investment.  Brokerage firms are required to perform adequate due diligence on any investment they recommend and to adequately disclose the risks of any investment.  Additionally, brokerage firms are required to ensure that all investment recommendations made are suitable in light of the client’s age, investment experience, investment objectives, net worth, and income.

To the extent that a brokerage firm fails to perform adequate due diligence, to properly disclose the risks, or recommends an investment unsuitably, the firm may be held responsible for any resulting losses in a FINRA arbitration claim.

According to the offering materials, investors in UBS’s V10 Enhanced FX Carry Strategy bought notes whose value was tied to an index called the V10. Marketing documents on UBS’s website show how the index was calculated: First, currencies from the Group of 10 countries are ranked daily by their one-month interest rates. Using forward contracts, the bank bets that the three highest-yielding currencies will advance and the three lowest will decline. When volatility rises above a predetermined level, the positions are reversed.

Betting on the currency market is extremely risky and should only be undertaken by extremely sophisticated and/or institutional investors.

Investing in UBS’s V10 Enhanced FX Carry Strategy may not be suitable for you if:

¨ You seek an investment that offers any principal protection.
¨ You are not willing to accept the risks of foreign exchange trading in general.
¨ You do not believe the Index Return will be positive.
¨ You are not willing to make an investment that will be exposed to both upside and downside price risks on long and short positions in the foreign exchange forward contracts underlying the UBS V10 Currency Index as they may be dynamically adjusted in response to market conditions.
¨ You prefer lower risk (and accept the potentially lower returns) of fixed income investments with comparable maturities and issuer credit ratings that bear interest at a prevailing market rate.
¨ You seek current income from your investments.
¨ You are unable or unwilling to hold the Securities to maturity.
¨ You seek an investment for which there will be an active secondary market.
¨ You are not willing or are unable to assume the credit risk associated with UBS, as issuer of the Securities.

Unfortunately it appears that some financial advisors may have downplayed these risks and recommended UBS’s V10 Enhanced FX Carry Strategy unsuitably.

If you invested in UBS’s V10 Enhanced FX Carry Strategy and you would like to discuss your litigation options, please call the securities attorneys of The White Law Group at 312/238-9650 for a free consultation.

The White Law Group, LLC is a national securities fraud, securities arbitration, investor protection, and securities regulation/compliance law firm with offices in Chicago, Illinois and Franklin, Tennessee.

For more information on The White Law Group, visit https://whitesecuritieslaw.com.

Tags: , , , , , , , , , Last modified: July 17, 2015