Greco & Greco is currently investigating and filing FINRA arbitration claims for investors harmed by UBS’s Yield Enhancement Strategy. This strategy was marketed to UBS customers as a means to generate additional income on existing accounts with minimal risk. UBS claimed that the options program, which allegedly used an “Iron Condor” strategy, would a) generate cash flow from lower yielding assets, b) mitigate downside exposure and provide downside protection, c) provide income when markets were flat or trending lower, d) limit exposure to significant downward market movements, e) manage risk, and f) provide portfolio diversification.
These representations proved to be untrue with investors losing large amounts of money from the use of the YES program, especially at times of high market volatility.
As is often the case in the industry, the true reason brokers may have recommended the strategy comes back to fees. The program allowed UBS and its brokers to earn additional fees on the same amount of assets by adding an additional “mandate” dollar amount upon which a percentage fee would be charged. The program could allow UBS and the broker to earn an additional 1.75% on an additional dollar amount above the accounts’ value, although the net value of the customer accounts remained the same.
UBS and its brokers owed its customers duties to discuss and disclose the risks associated with any recommended strategy, and to only recommend and implement securities strategies suitable for the customer’s financial situation, goals, needs, and risk tolerance.
UBS’s actions related to the Yield Enhancement Strategy may have violated the FINRA suitability Rule, and further may constitute negligence, breach of fiduciary duty, fraud, violations of state securities Acts, and breach of contract. If you suffered losses from UBS’s Yield Enhancement Strategy and wish to discuss your claims for free with an attorney, please contact W. Scott Greco here.