What Did Your Brokerage Firm or Investment Adviser Do Wrong With GWG
Published On: September 8, 2020

Chicago-based Stoltmann Law Offices continues to investigate investor claims related to UBS YES products.  In recent years, with savings yields at rock bottom, investors have been eager to attempt to safely earn a higher return on their money. Wall Street has responded with so-called “yield enhancement strategies” (YES) designed to pump up returns. But these strategies eek out this extra yield by employing extremely risky options trading strategies.

What brokers haven’t told investors in countless pitches, however, is that yield enhancement products are complicated and carry numerous hidden risks. The UBS YES program, involving an “iron condor” options trading plan, has attracted a great deal of attention recently. Investors are suing UBS, the Swiss wealth management firm, claiming they lost money when UBS brokers enrolled them in the strategy. Arbitration claims against the company have also been filed with FINRA, the securities industry regulator.

Investors who invested in the UBS YES program claim they suffered losses, even though the firm claimed the strategy was “conservative” and “low risk,” according to Wealthmanagement.com. What investors apparently were not told is how complex and convoluted the YES strategy was:

“In an iron condor, a trader uses four different options contracts with the same expiration date but different exercise prices, usually for an index (YES used European-style contracts for S&P 500 Index futures),” writes Michael Thrasherwith Wealthmanagement.com.

“Traders create two spreads by simultaneously selling calls and puts to generate income, or premium, and buying calls and puts to hedge risk and contain potential losses,” Thrasher adds. “As long as the price stays within the breakeven points created by the spreads, you make money. However, sudden price swings can blow past the breakeven points of the iron condor, resulting in losses for most of the positions and a losing trade.”

For most investors not well-schooled in options trading, this is a difficult, mostly opaque product and certainly not low risk. Truth be told, many brokers don’t understand the strategy either. UBS, in a statement, countered that “the benefits and risks of the YES strategy were fully disclosed to investors.”

UBS has often run afoul of investors in the past. The U.S. Securities and Exchange Commission (SEC) fined the firm $10 million in July regarding municipal bond offerings. Last year, a French Court found the firm guilty of money laundering, fining it $5 billion. In 2018, UBS agreed to a $230 million settlement with the New York Attorney General in connection with sales of residential mortgage-backed securities “in the period leading up to the [2008] financial crisis.” UBS also agreed to a $115 million settlement in 2007 in connection with the collapse of the energy company Enron, which filed for bankruptcy in 2001 after a massive accounting fraud.

“UBS was one of several financial institutions accused of helping Enron create financial structures that hid the company’s true financial condition,” according to The New York Times. “The collapse wiped out thousands of jobs, more than $60 billion in market value and more than $2 billion in pension plans.”

Have you invested with brokers who have sold you vehicles such as yield enhancement strategies?  FINRA and the SEC have strict rules on disclosing risk profiles on all investments sold by brokers and investment advisers. Firms are also legally required by FINRA to monitor and supervise what their brokers are selling – their investments must be vetted and authorized by the firms – and have an obligation to investors to fully reveal true risk and return information about the vehicles sold. Furthermore, financial advisors and brokers have a common sense obligation to understand the investment products they sell to their clients. Investors can file FINRA arbitration complaints if these rules are broken.

If you invested with a broker-advisor and lost money as a result, you may have a claim to pursue through FINRA Arbitration. Please contact Stoltmann Law Offices, P.C. at 312-332-4200 for a free, no obligation consultation with a securities attorney. Stoltmann Law Offices is a contingency fee law firm which means we do not get paid until you do!


The posting on this site are mere OPINIONS and NOT statements of fact in any way whatsoever. The information should not be relied upon and there have been no findings made against the firms or individuals referenced on this site. In addition, this Blog is made available for educational purposes only and incorporates information from the web as well as to give you general information and a general understanding of the law, not to provide specific legal advice. By using this blog site you understand that there is no attorney client relationship between you and Stoltmann Law Offices (161 N Clark Street 16th Floor Chicago, IL 60601). The Blog opinions should not be used as a substitute for competent legal advice from a licensed professional attorney in your state.


Chicago Investment Fraud Attorneys Offering Nationwide Representation to Investors

If you have suffered financial losses because of the negligence or fraud of your financial advisor or broker through unsuitable investment recommendations, over-concentration, churning, misrepresenting risks, conversion or selling away, you have legal rights and options to pursue recovery of those losses.

Stoltmann Law Securities Investment Fraud Attorneys