How the Promise of Modest Returns Led to Substantial Losses for UBS YES Strategy Investors

The UBS YES strategy was supposed to offer wealthy investors a way to earn modest returns with limited risk. Instead of promising substantial returns, UBS brokers told investors that they could expect returns somewhere in the range of three to six percent—a modest increase in their returns (or “enhancement” of their “yield”). For investors who had millions of dollars in liquidity, this seemed well worth it, and they invested heavily based on their brokers’ advice.

The Fundamental Flaws in the UBS YES Strategy

The fundamental concept of the UBS YES strategy seemed simple enough: Investors would purchase options above and below a range of expected market volatility, and they would collect option premiums if the market remained within this range. In this way, the UBS YES strategy effectively bet on market stability—an approach that is (or was) attractive to high-net-worth investors. In addition to relying on their more traditional investments to ride the market, UBS YES investors could simultaneously enhance their yield simply by relying on the market not to swing too wildly in either direction.

But, the UBS YES strategy also proved to be fundamentally flawed. In order for a bet on market stability to make sense, there needs to be evidence to suggest that the market will, in fact, remain stable. This means that brokers who recommend the strategy need to do their research, and they need to know when it no longer makes sense to bet on the market staying within a very specific and narrow range.

While the UBS YES strategy worked initially—long enough for many investors to become hooked—it stopped working when the market became volatile heading into 2019. Despite this, and despite clear evidence that there was more volatility to come, UBS brokers kept recommending the YES strategy to their wealthy clients. As a result, these wealthy clients suffered substantial losses. Since the UBS YES strategy involves buying options rather than assets, they had virtually no way to recover their losses through market forces.

Why UBS Brokers Continued to Recommend the Failing YES Strategy

Why did UBS brokers continue to recommend the firm’s YES strategy when it wasn’t working? There appear to be three primary drivers. In various circumstances, UBS brokers either:

• Were ignorant to the market forces that made the UBS YES strategy untenable;
• Didn’t understand the UBS YES strategy well enough to advise clients regarding its risks; or,
• Ignored the strategy’s risks because they earned commissions regardless of how the strategy performed.

Regardless of the specific circumstances involved, due to their brokers’ negligence and misconduct, many investors who lost money with the UBS YES strategy are now able to recover these losses through FINRA arbitration. Several investors have succeeded in recovering their losses already, and many more claims remain pending.

Speak with an Investment Fraud Attorney About Your UBS YES Strategy Losses

Have you suffered losses with the UBS YES strategy? Call 212-742-1414 or contact us online to discuss your case with an investment fraud attorney at Zamansky LLC.