September 16, 2021
A 3-person arbitration panel has ordered UBS Wealth Administration USA to pay a rich Houston investor virtually $358,000 in damages tied to a broadly marketed options-spread technique dubbed YES (Yield Enhancement Technique) that went awry throughout market volatility, in response to an award finalized Wednesday.
The choice is the newest in a protracted string of claims involving the YES technique however marks the primary time that the claimants have received the total quantity of their injury claims, in response to Jake Zamansky, a New York Metropolis lawyer who represented the investor on this go well with and is shepherding about 60 of the roughly 100 claims filed over the technique.
The claimant, Daniel Ferber, had argued that his advisors and UBS in its advertising supplies fraudulently misrepresented the draw back danger and quantity of leverage related to the technique. The technique was pitched as a low-risk strategy to generate a further 3% to 4% per yr for patrons however UBS didn’t disclose the traders may lose as a lot as 35%, Zamansky stated.
“We name this selecting up pennies in entrance of the steamroller,” Zamansky stated. “What rational investor would ever take that wager?”
Zamansky stated he believed the case may very well be a “gamechanger” as they’d simplified their argument to deal with the shortage of danger disclosures in providing supplies quite than a extra difficult declare in regards to the “directional” nature of the technique that had solely blended success in different instances.
A UBS spokesman declined to touch upon the award. UBS has prevailed in eight of the 13 arbitration awards issued in YES instances. Within the different 5, the traders obtained lower than the entire damages they’d sought.
In Ferber’s case, the arbitrators denied an expungement request from two Houston brokers, Mark Elias and Scott Rosenberg, who weren’t named as respondents within the case, but in addition denied the claimant’s request for attorneys’ charges and curiosity.
UBS final month was ordered to pay a claimant Allison R. Stroll $300,000 in one other YES choices case. Stroll, who himself is registered as a dealer with Pickwick Capital Companions in White Plains, New York, had requested a spread of damages from $482,000 to $1.14 million in damages, in response to the August 23 award. It additionally denied a request from the usbroker, who was not named as a celebration, to expunge his document.
However one other three-person panel three days earlier denied one other declare for roughly $Four million in compensatory and punitive damages and ordered the complaints wiped from the brokers’ data.
The YES technique was devised by a New York crew of advisors led by Matthew Buchsbaum, who joined UBS in 2015 from Credit score Suisse Securities, the place the choices overlay technique originated. It was designed as a market-neutral technique that might “generate more money circulate from lower-yielding property” by the sale and buy of S&P 500 index choice spreads, in response to a UBS advertising brochure. It had a “outlined most loss” that will be restricted to premiums paid in addition to assured earnings from accumulating premiums for writing choices, in response to stories issued to traders.
Returns in YES portfolios plummeted by about 20% in 2018, nevertheless, when the S&P 500 tanked in December of that yr, and had deteriorated by greater than 40% amid the intense market volatility sparked by the Covid-19 pandemic, in response to UBS stories to traders.