According to the SEC’s letter, the YES product was a legacy holdover from Credit Suisse.
“UBS recruited the YES Team from Credit Suisse Securities USA in late 2015, paying them upfront awards of approximately $50 million,” the SEC settlement said. “UBS also recruited a number of financial advisors from Credit Suisse. Collectively, the legacy Credit Suisse financial advisors brought to UBS approximately 300 client accounts with approximately $1 billion in YES.”
The product was designed for wealthy investors. The fee for the product overlay was 1.75% for accounts of $5 million and under.
UBS opened the product up to new investors in February 2016, road-showing it in Texas, California and New York and explaining the concept to its remote advisors.
“The YES Team marketed the strategy as a way to enhance returns on an existing portfolio of securities," the SEC letter said. “The YES Team generally explained to financial advisors and clients that historically the strategy had generated gains of approximately 3%-to-5% per year with worst-case historical losses of approximately 1% per year. The YES Team acknowledged that the strategy had experienced losses up to 11% in a single month, but explained that this created a potential profit opportunity because they could try to sell options at premium prices, sometimes analogizing the program to writing ‘hurricane insurance.’”
The client accounts increased by 600 and the amount invested in YES increased by approximately $2 billion in the next year through February 2017.
A UBS spokesperson said the firm would not comment on the most recent settlement.