UBS’s Flawed Yield Enhancement Strategy (YES)

The so-called  “Yield Enhancement Strategy,”  or “YES,” has seen a major rise in popularity at large investment firms, especially UBS,  as a vehicle for investors  to “enhance” returns relatively safely.  “YES” has been pitched as a relatively safe way to generate enhanced returns on a consistent basis, especially when markets are flat.   Fairly stable markets have been norm for many years, until recently, making  this approach attractive  to many  investors.  However, because of this historic stability,  the inherent risks of the investment have not been widely known to investors.

As a result, because “YES” relies on stability in the market place,  when significant volatility does hit, as it has at various times in the last 18 months, particularly last December, it can cause major losses to unsuspecting investors who were not prepared for them.

The “YES” Strategy is not only risky, but exceedingly complicated, involving an exotic options play, which is difficult for all but the most sophisticated investors to understand.  YES is only appropriate for the most experienced and sophisticated investors, those with a high risk tolerance and who understand options strategies, and only when accompanied with proper and specific disclosure of all the underlying risks.  Unfortunately, it appears that this product may have been sold to many investors without proper risk disclosure who did not meet the above criteria.

Investors who have suffered losses from this type of product may have recourse to recoup them in FINRA arbitration.

For more information on FINRA arbitration you can visit the website of Rich, Intelisano & Katz, LLP or FINRA’s website.