RIK Files $3 Million Claim Related to the UBS Yield Enhancement Strategy (“YES”)

Rich, Intelisano & Katz, LLP (RIK) filed a $3 million FINRA arbitration this month on behalf of clients that invested in UBS Financial Services, Inc.’s Yield Enhancement Strategy (YES).  UBS claimed the YES Program had minimal risk, but unbeknownst to its customers, the risks of this options trading strategy significantly outweighed any potential gain.  Unfortunately, investors around the world lost hundreds of millions of dollars investing in YES.

Although UBS and its brokers claimed the YES Program had limited risk of loss, in actuality, this was a high-risk strategy.  UBS implemented the YES Program beginning in 2016 after it recruited a high-profile team of brokers from Credit Suisse with massive up front bonuses.   To entice customers to invest, UBS represented that the YES Program was a low-risk way to generate incremental income of 3% to 6% annually (before the deduction of fees).  UBS further stated that the Program used protective options trading combinations to create a market-neutral strategy, meaning the Program’s performance would have little correlation to the markets, thereby protecting investors from significant losses.  These low-risk and loss protection statements made by UBS contradict the actual risks associated with the Program.

The fact is that the YES Program was a high-risk, complex options strategy that subjected UBS customers to significant market exposure and risk of loss.  This complex options strategy involved hundreds of combinations of puts and calls.  The complexity of the program and the lack of adequate risk controls exposed YES investors to significant risk of loss – loss that was far beyond the alleged risk protection.  Specifically, YES investors were exposed to 15% to 40% of losses depending on their holding period, even though their expected annual income was only 3% to 6%.  In sum, YES was not the low-risk, market neutral, downside protection strategy that UBS had stressed to its customers.

Since its inception in 2016, approximately 1,500 UBS customers invested in YES.  Unfortunately for these customers, the Program took a downfall in 2018.  In December 2018 alone, the Program suffered losses of 13%.  Losses for the entire year approached 20% – a number significantly greater than the purported downside protection should have permitted.  If the actual potential losses were disclosed to customers, no rational investor would invest in YES knowing the potential upside was only 3% to 6% in gross income before fees.  Because this strategy was complex, fraught with risk, and lacked adequate risk protections, investors’ losses are estimated to be approximately $1 billion.

Our firm represents investors who have suffered losses due to UBS’s YES Program.  If you are one of the 1,500 UBS customers who were defrauded by UBS and its YES Program, feel free to contact us to discuss filing claims against UBS to recover any losses.

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