Securities Fraud Blog

Customers Suffer Losses in UBS Yield Enhancement Strategy

Published on: August 11, 2020 | by Greco & Greco, P.C.

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.

Two More Customer Awards Against UBS of Puerto Rico in 2019

Published on: August 8, 2020 | by Greco & Greco, P.C.

W. Scott Greco, working with local Puerto Rico co-counsel, represented multiple customers in FINRA arbitrations in 2019 against UBS of Puerto Rico that resulted in monetary awards to the customers.

The first, a case involving overconcentration in risky UBS Puerto Rico closed end funds, resulted in an award of $4,813,161.00 which were the principal losses from February, 2013 forward, despite UBS’s claims that the accounts had a net out of pocket profit.

The second FINRA arbitration in 2019 involved overconcentration in a few Puerto Rico bonds, and resulted in an arbitration award of $195,000 including attorney fees, again despite UBS claims of a net out of pocket profit.

FINRA panel awards five UBS clients $521,000 in damages over Puerto Rican bonds

Published on: March 27, 2018 | by Greco & Greco, P.C.

An all-public arbitration panel of the Financial Industry Regulatory Authority Inc. has awarded five clients of UBS Financial Services more than $521,000 in compensatory damages in a case related to the clients’ investments in Puerto Rican bonds and closed-end bond funds.

The clients, all residents of Puerto Rico, claimed UBS violated the Puerto Rico Uniform Securities Act and engaged in securities fraud, common law fraud and constructive fraud, in addition to breaching its fiduciary duty and negligently supervising its personnel.

Greco & Greco Wins Third FINRA Arbitration Award Against UBS of Puerto Rico

Published on: February 26, 2018 | by Greco & Greco, P.C.

A FINRA arbitration panel issued an award of damages to Greco & Greco clients against UBS of Puerto Rico on February 23, 2018. The arbitration involved multiple Puerto Rico customers of UBS who had been invested primarily in UBS Puerto Rico Closed-End Mutual Funds and Puerto Rico Bonds.

The award, totaling $521,075.00 in damages, was significant because most of the damages were incurred in investments that UBS claimed were conservative (the Puerto Rico AAA Portfolio Bond Fund and COFINA bonds), and UBS further unsuccessfully claimed that the customers had not lost any money because of the interest/dividends they had earned over the years in the investments.

As set out in more detail at Greco & Greco’s website (http://www.securities-lawyers.net/ubs-puerto-rico) the UBS Puerto Rico Closed-End Funds (CEFs) were high risk investments which used leverage (a speculative investment technique) and which did not have a market (they were traded by UBS’s trading desk but UBS had the ability to stop trading of the funds at any time).

Investigation Regarding Terry Trenchard

Published on: March 21, 2017 | by Greco & Greco, P.C.

Investigation Regarding Terry Trenchard (aka Teryl Lee Trenchard) of Capitol Securities in Reston, Virginia.

Greco & Greco is currently investigating possible claims regarding a Reston, Virginia financial advisor, Terry Trenchard. Mr. Trenchard was registered to sell securities with Capitol Securities Management from 2009 to 2015, with Aegis Capital from 2003 to 2009, and with Voss & Co. from 2001 to 2003.

According to FINRA’s Brokercheck, Mr. Trenchard was discharged by Capitol Securities in March, 2017 while “under investigation for fraud.”

Prudential Fined for Failure to Supervise Fraudulent Withdrawals From Variable Annuity

Published on: July 22, 2016 | by Greco & Greco, P.C.

FINRA fined Prudential Annuities Distributors $950,000 this month for its failure to detect and prevent the theft by its agent, Travis Wetzel, of almost $1,300,000 from a customer’s variable annuity. The FINRA Letter of Acceptance, Waiver, and Consent may be found here.

Mr. Wetzel, who was a former registered representative of LPL Financial, allegedly submitted multiple forged wire transfer requests from the variable annuity, to be paid to a third party account in Mr. Wetzel’s wife’s maiden name.

FINRA alleged that Prudential failed to investigate red flags and audits associated with the repeated payments to third parties. FINRA stated, “PAD failed to establish and maintain reasonable supervisory procedures and controls to supervise third-party distributions and prevent fraudulent withdrawals from VA accounts.”

Washington DC Investment Advisor Dawn Bennett Barred by SEC

Published on: July 12, 2016 | by Greco & Greco, P.C.

As set out in this SEC Order from an Administrative Law Judge (https://www.sec.gov/alj/aljdec/2016/id1033jeg.pdf), Dawn Bennett has been barred from the securities industry by the SEC. Dawn Bennett was a Washington DC area advisor who was previously registered to sell securities with Western International Securities.

Judge Grimes also imposed over one million dollars of fines and disgorgement against Ms. Bennett. The findings in the above Order included the following:

“Respondents repeatedly overstated their AUM [Assets Under Management] by at least $1.5 billion in Barron’s magazine, on a radio show hosted by Bennett, and in various other advertisements and communications with existing and prospective clients to create the impression that Respondents were larger and more successful players in the industry than was actually the case.”

FINRA Award Against UBS of Puerto Rico

Published on: May 9, 2016 | by Greco & Greco, P.C.

Greco & Greco is pleased to report the first FINRA Arbitration Award against UBS Financial Services of Puerto Rico relating to the crash of UBS closed end bond funds in 2013 which were sold to Puerto Rico residents. W. Scott Greco represented the Claimant customer in the case of Bauza v. UBS Financial Services of Puerto Rico, et al. The arbitration panel awarded $200,000 in damages to the Claimant, despite claims by UBS that Claimant’s net out of pocket losses were less than $10,000.

The case involved a heavy over-concentration of the Claimant’s UBS account in proprietary UBS closed end bond funds pursuant to UBS’s recommendations. The funds invested heavily in Puerto Rico bonds using leverage (a speculative investment technique), and had significant geographic concentration risk.

Read about the arbitration award in this Reuters article.

Virginia Financial Fraud Task Force

Published on: May 8, 2016 | by Greco & Greco, P.C.

As set out in this Washington Post article, federal prosecutors in Virginia have set up the Virginia Financial and Securities Fraud Task Force. This task force is comprised of members of the FBI, the Postal Inspection Service, the Securities and Exchange Commission, the Commodities Futures Trading Commission and the Virginia State Corporation Commission.

As set out in the story, the task force’s efforts have already resulted in multiple criminal convictions. A criminal conviction, however, does not always recoup losses for investors wronged by financial fraud. If you are the victim of a financial crime in which the salesperson or others involved in the scheme were registered to sell securities through a FINRA brokerage firm, you may be able to seek recovery of your losses through FINRA’s arbitration system.

Vienna Virginia Financial Advisor Pleads Guilty to Defrauding Customers

Published on: May 7, 2016 | by Greco & Greco, P.C.

Ismail Elmas plead guilty on October 21, 2014 to a Count of Wire Fraud in the U.S. District Court for the Eastern District of Virginia. According to the U.S. Attorney’s Office press release (which can be found here), Mr. Elmas worked at Apple Financial Services, an affiliate of Apple Federal Credit Union during the time of the offense.

FINRA’s Brokercheck Report for Mr. Elmas states that Mr. Elmas was previously registered as a securities registered representative with CUNA Brokerage Services and CUSO Financial Services, both FINRA Broker-Dealers. The Brokercheck Report states that he was terminated by CUSO because he “allegedly converted funds for personal use…”

The above press release references that Elmas admitted to misappropriating client funds given to him for legitimate investments, and that he defrauded more than 10 of his clients, many of whom were seniors and widows.