Securities Fraud Attorney Blog
The investment fraud lawyers at Rich, Intelisano & Katz (“RIK”) won $3.2 million for their clients, Bret and Marion Pearlman, in a recent FINRA arbitration against UBS. The Pearlmans’ claim was for misrepresentations and omissions related to UBS’s Yield Enhancement Strategy (YES) – an options overlay strategy. It is the third largest award against UBS related to YES. Investors have tried to a final award approximately 46 YES cases against UBS and have won roughly one-half of those cases. RIK has tried only two cases to a final award and won the largest award ($5.2 million) and the third largest one. In both cases, the awards reflected over 90% of the clients’ losses as of the date of the filing of the arbitration. Read the full award here.
Options overlay strategies use underlying assets, such as equities, cash, and bonds, as collateral to buy and sell options. In its most basic understanding, UBS’s options overlay strategy, YES, periodically bought and sold options, simultaneously, to generate income from the sale of options. In many cases, YES was pitched and marketed to UBS customers as a “low-risk” strategy that seeks to enhance portfolios approximately 2-6% of their mandate annually (the mandate is the underlying amount of collateral the customers elect to use for the strategy). YES was further marketed as having limited to no correlation to the S&P 500. Additionally, in its materials and disclosures, UBS stated that the managers of the program utilized various methods to “limit” risk exposure. In reality, YES was a high-risk strategy that added significant risk to the underlying assets where potential losses were awfully disproportionate to any potential gains. The additional risks and potential losses were never fully disclosed to many customers.
RIK’s securities attorneys have represented many investors of YES and other complicated options strategies in legal actions against UBS and other firms. If you have losses related to YES or options trading strategies, do not hesitate and feel free to schedule an appointment here or call us at (212) 684-0300 for a free consultation.