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Recouping Losses: UBS Financial Services Yield Enhancement Strategy Causes Significant Losses in Customer Accounts

Levin Law | 2.13.2019

UBS Financial Services is a multinational financial services firm that is involved in virtually all major financial activities from retail banking to investment management and wealth management. It is a financial bank of the highest caliber and credibility, much like Credit Suisse, Merrill Lynch, and Morgan Stanley. However, even the most credible financial institutions are capable of wrongdoing at some level. Investors who poured funds into “Yield Enhancement Strategies,” or “YES” options strategies may have suffered significant financial losses as a result of the flawed and overly risky investment strategy.

What is a Yield Enhancement Strategy? 

Stock options provide the right to buy or sell a given financial product at a predetermined price within a fixed period. The price of the financial product at the expiration of the product may (or may not) trigger an event – either buy, sell, or no action. A Yield Enhancement Strategy is a form of investing where options are sold to enhance returns in generally flat markets. Analysts looked to this strategy as the market pulled back from its previously bullish stance from years prior. The YES investment is sometimes referred to as an “iron condor” strategy. The iron condor is colorfully named for its appearance on a graph (this spread belongs to a family of investment strategies called wingspreads whose members are named after a variety of flying creatures, including iron butterflies, long condors, and others). The open wings of the condor lie in the red, where funds are lost, while the body of the strategy lies in the green, where investors are expected to profit.

In a flat market, the iron condor soars. However, that has not been the case as of late. As the market fluctuated and became increasingly more volatile near the end of 2018, some YES investors reported losses of more than 20% of their committed capital. This was hardly what they were promised when they committed funds to UBS.

Legal Recourse for Investors 

Investors began suffering losses in YES investments when they were asked to front additional collateral while incurring considerable losses. Contrary to recent market fluctuations, the YES investment functions optimally in environments of low volatility, while stockbrokers consultants continued to promise maximum gains.

The law requires that financial institutions make sure that investors be well-informed before making investment decisions. As a result of the oversized losses resulting from YES, many investors are filing lawsuits and arbitration claims because they allege that brokerage firms like UBS Financial Services did not provide investors with full disclosure, adequate counseling, and in some cases, alleged outright fraud. Investors who have suffered significant financial losses may be able to recover some of their losses through the Financial Industry Regulatory Authority (FINRA) arbitration, an expedited, yet binding legal proceeding.

The YES investment is not the first of its kind. Years ago, a firm that called itself ‘Universal Brokerage FX’ duped would-be investors with its “Yield Enhancement Analysis Program” (YEAP) promising low-risk investment strategies with high rates of return. The YEAP program targeted U.S. investors for a ‘free money’ policy in Japan by leveraging risk and collecting daily interest on client funds. After losing considerable investments and asking for additional collateral, investors were tipped off to the warning signs, similar to the red flags in UBS’ YES investments.

Even the name of the strategy is not unique as Bayvest Capital Funding Limited marketed its “high yield capital enhancement strategy” over a decade ago in 2009.  Many are also aware of Bayvest’s criminal investigation for fraud, pretenses, and defalcation as a result of losses incurred by the failed strategy.

Contact Attorney Brian Levin Today  

If you believe that you suffered losses in an iron condor, or other YES strategy with UBS Financial Services, Merrill Lynch, Morgan Stanley, Credit Suisse, or any other financial institution,  it is important that you contact an attorney immediately to evaluate your legal rights. Meeting with an attorney is the first step to obtaining justice for your claim. Your attorney can discuss the importance of establishing a timeline of events, recording key events and figures, obtaining evidence to support your claim, and building your case. FINRA arbitrations can provide an expedited route for investors to recoup losses. With offices located in downtown Miami, Bloomfield Hills, Michigan, and in the heart of Los Angeles, Levin Law can answer your questions and provide quality representation.

If you have lost any money due to investment in the iron condor or other YES strategy, contact Brian Levin to discuss how you can recover your investment losses.

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