What You Need to Know
- An arbitration panel awarded $1.4 million to UBS clients who alleged the firm's options-trading strategy exposed them to risk.
- The claimant in this latest dispute over the UBS YES strategy was awarded less in damages than requested.
- The claimant was pleased with the arbitration panel's decision, its attorney told ThinkAdvisor.
UBS Financial Services must pay $1.4 million to additional clients who alleged that the firm’s Yield Enhancement Strategy (YES) — which focused on options-based trading — was unsuitable and inappropriate for their risk tolerance and investment objectives, according to an arbitration award posted on FINRA’s website on Wednesday.
Included in the award by a three-person panel of public arbitrators in Albuquerque, New Mexico, was $1.1 million in compensatory damages that included $933,092 for out-of-pocket losses and $176,393 in prejudgment interest.
The $1.4 million also included $26,148 in costs related to expert witness fees, $311,031 in attorneys’ fees based on contingent fee retainer and pursuant to New Mexico statutes, and $425 as reimbursement for the nonrefundable filing fee previously paid to FINRA Dispute Resolution Services.
UBS did not immediately respond to a request for comment on Thursday.
“As a general matter, our clients and we are very pleased that the FINRA arbitrators recognized UBS’s misconduct in the marketing and implementation of the YES strategy,” Jeffrey B. Kaplan, a partner in the law firm Dimond Kaplan & Rothstein that represented The David and Heather Weir Family Trust, the claimant, told ThinkAdvisor by email.
Fraud and Negligence Alleged
In its statement of claim, the claimant asserted that UBS was guilty of fraud, misrepresentation, unsuitable product, breach of fiduciary duty, negligence, failure to supervise, and breach of contract under the federal securities laws, FINRA regulations, applicable New Mexico state securities laws and applicable common law.
The causes of action related to UBS’s Yield Enhancement Strategy (YES), a managed-account options strategy product.
In the statement of claim, the claimant requested compensatory damages of about $1 million, including recovery of all trading losses, margin interest and fees received by UBS.