Launched in 2015 by UBS Financial Services, the Yield Enhancement Strategy (UBS YES) was marketed as a supposedly conservative options trading strategy — called an iron condor strategy —that would offer diversification along with stable, incremental returns through low yield.
Touted by the firm’s brokers as a low-risk alternative to traditional investment strategies, its entire premise was that a UBS customer could garner modest income while protecting his or her existing portfolio.
Investing in UBS YES was like taking a margin loan against current holdings, with a customer borrowing against their holdings at the firm to trade options. It was supposed to boost yields without overexposing the underlying assets. This Yield Enhancement Strategy was marketed to wealthy investors who had a net worth of $5M or greater. By 2018, YES holdings had reached around $6B.
What is an Iron Condor Strategy?UBS YES's iron condor strategy utilizes four distinctive options contracts. While each contract must have the same expiration date, they must utilize different exercise prices. The options are based on an index. UBS YES used S&P 500 Index futures.
Income is generated by selling puts and calls at the same time. The hedge component was created by purchasing calls and puts at the same time. The customer's underlying portfolio is used as collateral for the options transactions.
Misrepresentations Kept Investors From Knowing True RisksIn actuality, the risks of UBS YES were much greater than what was represented to investors. While the markets were good, these investors were impervious to risks.
However, when turbulence finally ensued, the losses these customers suffered were much larger than what the firm’s brokers had led them to believe could happen. Given the modest returns of maybe 4%, the risk/reward ratio was completely off, and it was always going to take time to recoup large losses at that return rate.
The UBS Yield Enhancement Strategy was even touted by the firm's brokers as a way to earn supplemental retirement income. Considering how unreliable and volatile this options trading strategy can be, it was utterly unsuitable to recommend UBS YES to investors who had this goal in mind.
Now, many UBS YES investors are contending that misrepresentations were made to them. They had expected to generate income regardless of how the markets behaved. Instead, this Yield Enhancement Strategy caused them huge losses during times of great volatility, such as in:
The YES Program has been run by a group known as Flatiron Partners, which operates within UBS and its private wealth management unit. The so-called masterminds of this strategy are New York brokers Matthew Buchsbaum and Scott Rosenberg, who, as of late 2021, are still at the firm.
Both of them have over two dozen customer disputes on their respective BrokerCheck records. Many of these cases, brought by YES investors seeking millions of dollars in financial recovery, are still pending.
The Yield Enhancement Strategy was made available to over 6,500 UBS financial advisors. This means that there are many other UBS brokers who made misrepresentations and unsuitable recommendations when promoting this iron condor strategy to customers.
UBS Made Nearly $100 Million Annually, Lost More Than $1B in YES Investors’ SavingsUBS always charged up to 1.75% in yearly fees on the full amount of an investor’s YES borrowings regardless of how much of that money was used by the firm. This doesn’t even include any underlying management charges. All of these fees resulted in the firm and its financial advisors making almost $100M each year.
Meanwhile, it is estimated that customer losses have exceeded $1 billion. For example, in December 2018, when UBS YES collapsed, the broker-dealer lost nearly $700M of investors’ money.
What Should You Do If You Suffered UBS YES Losses?UBS YES investors have suffered serious investment losses of 20% or more. For these high-net-worth investors, we are talking six-, seven-, even eight-figure losses.
If you are one of these investors, contact our seasoned UBS YES investor lawyers at Shepherd Smith Edwards and Kantas (SSEK Law Firm at investorlawyers.com) today. Already, we have won a $400K FINRA arbitration panel award against UBS for two investors in Baltimore, Maryland.
This is not the kind of securities case that you want to pursue without skilled securities attorneys who have the resources, knowledge, and experience to represent high-net-worth investors and other sophisticated investors against the biggest firms on Wall Street.
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