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What You Need to Know

  • A FINRA arbitration panel again ruled in favor of UBS clients who alleged the firm's options-trading strategy exposed them to risk.
  • The claimants, however, were again awarded less in punitive and compensatory damages than they had sought.
  • Some other disputes over the same options strategy were decided in favor of UBS over the past couple of years.

UBS Financial Services must pay nearly $1.2 million in compensatory damages plus interest to additional clients who alleged the firm’s Yield Enhancement Strategy (YES) — which focused on options-based trading — was misrepresented to them and wound up exposing them to risk of loss, according to a recent FINRA arbitration award.

In the statement of claim, B. Terry Bryant and Memorial Rock Investments asserted that UBS was guilty of “violations of state and federal securities laws (securities fraud), fraud; breach of fiduciary duty, negligence, gross negligence, negligent supervision, and breach of contract” regarding the YES options strategy.

This was not the first time that UBS was ordered to pay clients over its YES options-based trading. For example, a three-person arb panel ruled last year that UBS must pay nearly $371,000 in compensatory damages to claimants making similar allegations.

Some other disputes over the same options strategy, however, were decided in favor of UBS over the past couple of years.

UBS declined to comment Monday on the latest FINRA arb panel decision.

“We knew that UBS has prevailed in many of these YES cases, but were confident that our clients had a good case,” Lance C. Arney of the Houston law firm Gregor Wynne Arney, who represented the claimants, told ThinkAdvisor by email on Monday. “We are gratified to have received one of the largest awards to date for YES victims,” he said.

Still, the $1.18 million awarded to the claimants by the three-person arbitration panel on Thursday was less than the $1.78 million that had been requested.

In the statement of answer, UBS had requested an award against the claimants dismissing their statement of claim “in its entirety and with prejudice and such other and further relief as the Panel deems just and proper.”

The wirehouse’s request was denied.

In addition to ruling UBS was liable for and shall pay compensatory damages to the claimants, the FINRA arb panel also ruled the firm was liable for and shall pay the claimants interest on the $1.18 million at the rate of 6% per annum from June 28, 2019, through and including March 7, 2022.

The panel also assessed $9,325 of the FINRA hearing session fees jointly and severally to the claimants and $7,925 of those fees to UBS.

(Image: Shutterstock)


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