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Lawsuits Against UBS and Others for Yield Enhancement Strategy Losses Continue to Gain Momentum

August 28, 2019 Blog

News of YES Losses and Arbitration Increases in Financial Media Circuits

It’s no secret that investors have been unhappy with their purchase of yield enhancement strategy (YES) and iron condor investment options. Though clients were promised a safe and stable financial investment by their broker, the results of these purchases were anything but financial gains. Investors faced heavy losses, and lawsuits are being initiated against brokerage firms such as UBS.

UBS claimed that YES investments would yield a high return with little risk. Marketing materials state

[YES investments] generate returns through the strategic sale and purchase of SPX index option spreads. YES returns are incremental to the underlying asset returns and offer clients a way to potentially generate additional cash flow from lower yielding assets.

Instead, investors were unaware of just how much market volatility could destroy their investment. Though the marketing materials do establish that a YES option is not “suitable for all investors,” many clients did not recognize just how much was at stake. As a result, lawsuits relating to UBS yes strategy are on the rise. 

Stock Market Graph next to a 1 dollar bill (showing former president Washington). Red trend line indicates the stock market recession period

The Wall Street Journal (WSJ) recently published an article identifying the financial struggles of one YES investor: a woman represented by the founder of Zamansky, LLC, Jake Zamansky. The client, Ms. Sherrie Pellini, lost $750,000 off a $3 million investment with UBS. Ms. Pellini had also been charged a 1.75% investment fee which is considered a steep price compared to the typical 1% rate. Worse yet, her broker promised her the moon stating: “If the world came to an end tomorrow, you’d be the only one with any money left.” As such, Zamansky is representing Ms. Pellini in her demand for arbitration. 

Other news mediums have picked up Ms. Pellini’s story and provide both their insight and additional news regarding the steep financial losses investments in YES and iron condors:

  • reports that UBS was cited by investors at least 9 times since 2009. The author of the piece articulated that they believe the clients have a “good chance” of prevailing in their claims. 
  • Barron’s didn’t have new information to add, however, UBS provided the following statement to both Barron’s and the WSJ. The YES option was only offered to clients with a net worth of 5 million or more, and that the clients were “who were otherwise sophisticated investors and were already familiar with the strategy.” UBS also acknowledged that “a small percentage of clients” had initiated arbitration. 
  • Bizjournal’s Houston sector discussed UBS investigations that are growing throughout Texas. A local attorney cites the WSJ article as a reference for potential clients to understand the flaws in the YES option strategy.
  • An opinion piece was also published in Bloomberg Opinion. The author acknowledged how brokers can be at fault in these YES losses. The author states: 

The problem is whether the customers who bought it actually had and meant to express that particular set of views, and so the real dispute is over how it was marketed: Were UBS’s (quite rich but not necessarily “sophisticated”) customers told what the thing was, how it worked, and how it might go wrong, or were they just told “don’t worry about the details, you can never lose money”?

Were you a victim of a failed YES or Iron Condor investment? If so, please contact Jake Zamansky at (212) 742-1414 or via online form for further information on the lawsuits relating to UBS yes strategy losses.