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How the UBS YES Strategy Resulted in Substantial Losses for Investors

December 10, 2020 Blog

The UBS YES strategy was supposed to be a boon for wealthy investors. The brokerage firm touted its “yield enhancement strategy” as a way for its customers to earn reliable income with relatively low risk. As UBS explained the strategy in its sales pitches and marketing materials, it offered a way to generate returns regardless of which way the market turned, and there was simply no way that investors could say, “no,” to YES.

But, UBS left out the details, and these were what really mattered.

UBS Misled Wealthy Investors about the Risks Associated with Its YES Strategy

While it is true that the YES strategy can generate returns if the market goes up or down (by relying on an “iron condor” that involves purchasing multiple options at varying strike prices), it is also true that this upside potential is limited—in both directions. The YES strategy only works if the market remains in a narrow band of relatively low volatility—above the low-end strike prices for the naked options purchased for the iron condor, and below the high-end strike prices on the other side. As long as the market does not move too much, then investors can let their options expire, collect the option premiums, and do this over (and over) again.

But, the market often does move too much for the YES strategy to work. Since 2018 in particular, it has done so quite frequently. When this happens, UBS YES strategy investors can lose everything they have put in, with no hope of recouping their losses.

Even for UBS customers who purchased YES investment products through their local branch representatives, these sales were generally processed by an investment manager in UBS’s New York headquarters. As ABS News & Research explained in a recent exposé:

“UBS aggressively promoted its YES strategy throughout the country. Although the local branch UBS financial advisors may have introduced their clients to the program, most of them relied on the New York-based investment manager who oversaw the UBS YES strategy, Matthew Buchsbaum. Mr. Buchsbaum, according to his FINRA Brokercheck report (as of April 2020) already has 21 pending customer disputes disclosed on his BrokerCheck record, including one for $100 million.”

Why did UBS aggressively push wealthy investors into a high-risk investment product without disclosing the risks involved? There are a couple of explanations. First, the “iron condor” structure allows firms like UBS to earn fees regardless of how a customer’s investment performs. Second, UBS was not the only firm offering a yield enhancement strategy, and there appears to have been a “race to the bottom” for competing firms to convince high-net-worth individuals to invest their funds—even if this meant misleading them in the process.

Speak with an Investment Fraud Lawyer about Recovering Your UBS YES Strategy Losses

If you suffered substantial losses with the UBS YES strategy, you may be eligible to recover your losses through FINRA arbitration. To discuss your options with an investment fraud lawyer at Zamansky LLC, call 212-742-1414 or tell us how we can help online today.