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UBS’s Yield Enhancement Strategy (“YES”) Is Not an Iron Condor

February 23, 2022 | By John G. Rich and Christopher Keogh

Hundreds of investors have been duped by UBS’s Yield Enhancement Strategy (YES). In its marketing materials, UBS told investors that its YES strategy was an Iron Condor, a generally low risk options “overlay” strategy designed to generate incremental income on top of that generated from a customer’s other investment assets. Losses from such a strategy are supposed to be strictly defined and limited. However, UBS’s YES strategy was not the low risk Iron Condor strategy described to its customers by UBS financial advisors and in UBS marketing materials. In fact, the way UBS implemented YES resulted in potential losses that far outweighed any potential gain. Had UBS made full and fair disclosure of the true risks associated with its YES program, most UBS customers, if not all, particularly conservative ones, would likely never have enrolled in the strategy. Unfortunately, many customers, unaware of the true risks, invested in YES and experienced severe losses in late 2018, early 2019 and 2020 when the S&P dropped. RIK’s investment lawyers are pursuing multimillion-dollar FINRA arbitrations on behalf of investors against UBS to recover losses sustained from the YES strategy.

What Is an Iron Condor?

An Iron Condor is an options trading strategy that consists of simultaneously buying and selling a four option set of S&P Index put and call options, consisting of a combination of a bear call spread and a bull put spread, both having the same expiration date. Investors profit from this strategy when the S&P Index performs, whether up or down, within a “band” defined by the strike prices of the short options and certain breakeven points defined by the long option strike prices. Most short options expire worthless because they tend to lose value as they approach expiration, known as “time decay.” When this happens the buyers of the options will let the options expire unexecuted. In that case the investor (seller) gets to keep the premiums received from the sale of the put and call options, net of the premiums paid for the long options. This is the maximum profit. (Read more about what an option is here).

With the Reopening of In-person Hearings, Investors Will Continue Recovering for Losses Sustained UBS’s Yield Enhancement Strategy (“YES”)

September 21, 2021 | By John G. Rich and Christopher Keogh

Investors lost millions in UBS’s high-risk Yield Enhancement Strategy (“YES”). Despite UBS’s claims that this was a low-risk strategy and that losses were protected by hedging put and call options, investors had substantial losses when the S&P dropped in 2018 and 2019. Even with these losses, UBS brokers continued to push this strategy onto investors. Because of market volatility in early 2020, losses ensued further, causing investors to lose millions. RIK’s investment fraud lawyers represent several claimants in multimillion-dollar FINRA arbitrations against UBS on behalf of YES investors.

Investors who suffered losses from the YES strategy began to file claims against UBS as early as February 2019. Due to the coronavirus, FINRA arbitrations were conducted by videoconference for most of 2020 and 2021 (read more about FINRA Arbitrations During the Covid-19 Pandemic here). As a result, several YES investors had their arbitration hearings held remotely. Holding a remote hearing presents a variety of challenges and hurdles for investors. Three of the most significant difficulties for a claimant to overcome in a remote hearing are gaining credibility with the arbitrators, earning sympathy, and conducting an effective cross examination of respondent witnesses.

Credibility is based on the competence of the witness and determines whether their testimony is worthy of belief. In many cases, once the panel decides which witnesses are credible and which are not, the question of right and wrong is easily reached. Panels determine credibility, in part, by observing and examining how witnesses and attorneys react to a lawyer’s questioning. When a hearing is conducted through a two-dimensional platform, like videoconferencing, the ability to effectively and fully observe witness and attorney reactions is lost.

RIK investigating TD Ameritrade for unregistered former TD broker Ralph Wood, Jr.’s illegal trading activity

June 6, 2018 | By John G. Rich

RIK filed a FINRA arbitration against TD Ameritrade last week on behalf of a New Jersey family. A former TD Ameritrade broker named Ralph Wood, Jr., acted as an unregistered advisor to numerous customer accounts in the Short Hills, New Jersey branch (including our client’s), and lost tens of millions of dollars trading the SVXY for various clients of the firm. It is believed former TD broker Rushi Patel introduced Wood to the customers and knew that the accounts were being traded by Wood, an unregistered, unapproved third party advisor. If you invested with TD Ameritrade through Ralph Wood, Jr. or Rushi Patel, please contact us as we are actively investigating this improper activity.

Allowing an unregistered advisor to trade customer accounts without express written authority and oversight is a violation of FINRA Rules, including rules concerning account documentation and supervision. Investors who lost money with Wood in this strategy may have claims against TD Ameritrade for their losses.

FINRA Cites SAC Capital Advisors for Suspicious Trading

June 16, 2011 | By Rich, Intelisano & Katz

What is it going to take for the SEC to respond accordingly to tips of insider trading and hedge-fund fraud? When initial suspicion of Bernie Madoff’s widespread Ponzi scheme was discovered by FINRA, the SEC was slow to act on it. Now, multiple referrals from FINRA of suspicious trading at the hedge-fund firm, SAC Capital Advisors LP, have emerged and the SEC is hesitant to take further action once again. Below is the article from the Wall Street Journal regarding this issue.

Referrals on SAC Disclosed By JEAN EAGLESHAM June 16th, 2011

The Securities and Exchange Commission has received 65 referrals of suspicious trading at hedge-fund firm SAC Capital Advisors LP over the last decade, or 46 more than previously disclosed, according to Sen. Charles Grassley.