Investors lost millions in UBS’s high-risk Yield Enhancement Strategy (“YES”). Despite UBS’s claims that this was a low-risk strategy and that losses were protected by hedging put and call options, investors had substantial losses when the S&P dropped in 2018 and 2019. Even with these losses, UBS brokers continued to push this strategy onto investors. Because of market volatility in early 2020, losses ensued further, causing investors to lose millions. RIK’s investment fraud lawyers represent several claimants in multimillion-dollar FINRA arbitrations against UBS on behalf of YES investors.
Investors who suffered losses from the YES strategy began to file claims against UBS as early as February 2019. Due to the coronavirus, FINRA arbitrations were conducted by videoconference for most of 2020 and 2021 (read more about FINRA Arbitrations During the Covid-19 Pandemic here). As a result, several YES investors had their arbitration hearings held remotely. Holding a remote hearing presents a variety of challenges and hurdles for investors. Three of the most significant difficulties for a claimant to overcome in a remote hearing are gaining credibility with the arbitrators, earning sympathy, and conducting an effective cross examination of respondent witnesses.
Credibility is based on the competence of the witness and determines whether their testimony is worthy of belief. In many cases, once the panel decides which witnesses are credible and which are not, the question of right and wrong is easily reached. Panels determine credibility, in part, by observing and examining how witnesses and attorneys react to a lawyer’s questioning. When a hearing is conducted through a two-dimensional platform, like videoconferencing, the ability to effectively and fully observe witness and attorney reactions is lost.
Sympathy is also diminished on a two-dimensional platform. When the arbitration is conducted via videoconferencing, there is no longer daily physical proximity between the arbitrators and the claimants. Generally, for in-person hearings, the arbitration panel gets a flavor of the claimants, attorneys, and witnesses through seeing them and interacting with them on a daily basis. This is very important because FINRA is a forum of equity which is best gaged in an in-person setting. Unfortunately, getting to know the players well is lost when the arbitration is conducted remotely.
Cross examinations are more effective when conducted in-person. Many cases are won and lost on how well the witness handles cross examinations. Good and effective cross examination requires a steady and comprehensive flow of questions and facts, with the attorney being able to read the witness and arbitrators. This is diminished when using videoconferencing. For example, when using electronic devices for hearings, technological issues can occur. This stops the flow of cross examination. Additionally, it is harder to read the room and determine whether a person is lying, or whether the panel is interested. Without being able to effectively read the room, an attorney loses the ability to know which topics and facts to push into deeper.
Despite the challenges of conducting a videoconference hearing, investors have recovered hundreds of thousands against UBS in remote arbitrations. For some examples, in YES related arbitrations, in December 2020, Florida panel awarded claimant $90,000; in March 2021, an Ohio panel awarded claimants $370,000; and in March 2021 a Colorado panel awarded claimants $1,040,000. Other claimants have not been so lucky.
Recently, FINRA has resumed its in-person hearings. With the return of in-person hearings, hopefully permanently, the issues associated with remote hearings have ceased and investors can continue with in-person arbitrations as they did pre-pandemic. For example, after an in-person hearing in August, a Maryland panel awarded two YES investors $300,000 in damages, and an additional $105,000 for attorneys’ fees and litigation costs. Holding in-person hearings will benefit YES investors and help them recover for their losses.
RIK’s securities and investment fraud lawyers have decades of experience representing investors in FINRA arbitrations relating to options trading. Our firm represents investors seeking to recover for losses sustained from UBS’s YES strategy. If you have losses due to UBS’s YES strategy, contact us here for a free consultation.