UBS Financial Services was ordered by a three-person Finra arbitration panel to pay investors about $975,000 for alleged violations relating to an options shorting strategy that has been the target of multiple lawsuits that contend it is too risky for most investors.
The claimants—Jacques Andre Soileau, Jennifer Beth Plauche Soileau and Nexgen Investments—asserted negligent supervision, fraud, breach of fiduciary duty and breach of contract, among other causes of action.
UBS advisors did not understand the product and thus sold an unsuitable, high-risk investment as a low-risk strategy, leading to nearly $700,000 in losses to his clients, according to the claim filed by the Soileaus’s attorney, Jeff Erez of Erez Law in Miami.
The Finra arbitrators who heard the case agreed, unanimously ruling that UBS was liable and awarding the customers $687,403 in compensatory damages and prejudgment interest, $58,644 in costs and $229,134 in attorneys’ fees.
YES uses a complex strategy that includes borrowing on margin against a client’s account and using the proceeds to invest in options to generate higher returns.
The Soileaus, who live in Eunice, La., invested in YES through brokers in a UBS office in Houston in late 2017. They filed their arbitration claim in December 2020.
Erez asserted in the claim that UBS advisors were themselves misled by UBS employees whose job it was to pitch the YES strategy to advisors without adequate supervison.The advisors, who did not understand the product, then turned around and made recommendations to the Soileaus which violated the advisors’ and firm’s fiduciary duty.
This is the third award Erez has won against UBS for their YES strategy since March. In one case, his clients won $3.9 million and in another $1.5 million.
UBS declined to comment on the award, spokesman Jon Humphreys said in an email.
It is “clear that UBS clients in some instances may have told clients one thing at the time they invested, and now those same clients who questioned unexpected investment losses in their account were being told something quite different,” Matthew Thibaut, a partner with the law firm of Haselkorn & Thibaut, P.A said.