UBS Will Pay $25 Million To Settle Yield Enhancement Strategy (YES Strategy) Fraud Charges

On June 29th, 2022, the Securities and Exchange Commission (SEC) announced that UBS Financial Services Inc., the multinational investment banking company and brokerage firm, will pay around $25 million to settle investment fraud charges related to its Yield Enhancement Strategy (YES Strategy). Here, our Miami unsuitable investment losses lawyer discusses the settlement and Yield Enhancement Strategy (YES strategy).

What is the Yield Enhancement Strategy (YES Strategy)? 

The Yield Enhancement Strategy (YES) was promoted by UBS Financial Services Inc and other brokerage firms as a low-risk way for investors to make an above market return. It is a highly complex investment strategy that requires an investor to buy stock options at both the high-end and low-end of a pre-specified range.

In a relatively flat trading market, the YES Strategy works well. It can enhance an investor’s total return. However, it is not a low risk investment strategy. If the market turns volatile, an investor is exposed to significant risk. They could sustain major, unanticipated losses if the security in question trades outside of the pre-specified range.

The YES Strategy Failed Many Investors in Early 2018 

As noted in the SEC Order, UBS Financial Services Inc. began touting the Yield Enhancement Strategy in 2016 and 2017. In total, more than 600 investors at UBS Financial Services Inc. used the YES trading strategy. For more than a year, the market was relatively flat and the trading strategy worked as advertised. However, in early 2018, there was a period of volatility. Suddenly, the Yield Enhancement Strategy exposed investors to serious financial losses. Indeed, many investors who thought that they were in a safe, low-risk position sustained steep losses―40 percent, 50 percent, or more—on their investment.

UBS Financial Services Inc. Settles YES Unsuitable Investment Case for $25 Million

Brokers and brokerage firms have a responsibility to ensure that they are offering suitable trading guidance to their investors. Under FINRA Rule 2111, a broker or broker-dealer may be legally liable for losses caused by an unsuitable strategy trading. The SEC determined that the more than 600 investors at UBS Financial Services Inc. that followed the YES Strategy were not properly informed of the risk. In fact, investors were generally told that this was a low risk or virtually no risk trading strategy that would allow them to make a greater return on the principal. Of course, the reality was far different. Once any level of market volatility hit—which is inevitable—the investors were exposed and they sustained significant financial losses.

 Call Our Miami, FL Unsuitable Investment Attorney Today

At ​Carlson & Associates, P.A., we fight for the legal rights of investors. If you sustained financial losses because your broker or brokerage firm recommended that you use the unsuitable YES Strategy, our attorney is more than ready to help you navigate the legal process. Call us today to set up a fully private investment fraud case review. Our firm represents investors throughout Florida.

Source:

sec.gov/news/press-release/2022-117