Español Inner

Articles Tagged with ubs

Published on:

money whirlpoolIn response to the low interest rate environment that has prevailed for a decade, many brokerage firms — including well-known wirehouses such as Merrill Lynch, Morgan Stanley, and UBS — have reportedly recommended various options strategies to their customers as supposedly safe and efficient mechanisms to enhance income.  However, when stock markets turn volatile, these strategies can quickly spiral into unexpected investment losses for retail investors — as recently occurred during a spike in stock market volatility that peaked on February 5, 2018.

Despite the risks embedded in options, particularly naked options, brokerage firms like Merrill Lynch, Morgan Stanley and UBS have reportedly presented some retail investors with opportunities to engage in sophisticated, highly complex options strategies, often fraught with risk.  One such options strategy, marketed in some instances as a yield enhancement strategy (or “YES”), involves writing so-called iron condors through S&P 500 derived options.  In some instances, investors are steered into such strategies seeking the option premium income, without actually understanding the risks associated with options trading strategies.

When it comes to yield enhancement options strategies, perhaps the most commonly used financial instrument is the extremely well-known S&P 500 Index (“SPX”), a stock index based on the 500 largest companies whose stock is listed for trading on the NYSE or NASDAQ.  The Chicago Board Options Exchange (“CBOE”) is the exclusive provider of SPX options.  In this regard, CBOE provides a range of SPX options with varying settlement ranges and dates, including A.M. and P.M. settlement, weekly options and end-of-month options.  Significantly, because SPX is a theoretical index, an investor who engages in options trading using SPX will necessarily be engaging in uncovered, or naked, options trading.

Published on:

Securities fraud attorneys are currently investigating claims on behalf of the clients of UBS Financial Services Inc. and David Lugo. Lugo allegedly made unsuitable recommendations and misrepresentations of Puerto Rico municipal bonds and UBS proprietary Puerto Rico municipal bond funds.

Clients of UBS David Lugo Could Recover Losses

In one claim already filed by stock fraud lawyers, the claimant, one of Lugo’s clients, seeks to recover approximately $15 million. According to the allegations in this claim and others, Lugo reportedly recommended that his clients invest significant portions of their accounts in UBS proprietary Puerto Rico municipal bond funds and Puerto Rico municipal bonds. In addition, the amount invested frequently represented large concentrations of the total net worth of the client. Reportedly, these investments were marketed and sold as low-risk and clients were told they would be paid high, tax-advantaged dividends.

Lugo’s clients also allege that they were not warned that the UBS bond funds were highly leveraged. Lugo also allegedly recommended a UBS margin account in order to borrow funds to increase his clients’ Puerto Rico municipal bond investments. While this investment strategy was highly speculative and posed a high risk of principal loss, Lugo allegedly did not warn his clients of the risks and made unsuitable recommendations.

Published on:

The Problem: Investors have reported that financial advisors in Puerto Rico, especially those at UBS Puerto Rico, sold them closed-end funds based on the representation that the funds paid a steady yield of income, but were safe and that investors’ money was not at risk because of the secure municipal bonds backed by the Puerto Rico government in which the funds invested. Some of these UBS Puerto Rico closed-end funds have lost over half their value in a period of only 2 months.

Sold As Safe Many investors report that UBS and other brokerage firms in Puerto Rico sold these funds to investors as safe fixed-income investments. Of course, they have proved to be anything but safe, and many investors have lost much or even all of their retirement savings.

Dangerous Borrowings Against Accounts: Many investors who needed to withdraw money from their accounts for personal reasons (such as to purchase a home or fund a child’s education) have reportedly been advised to borrow money from UBS and other brokerage firms instead of selling shares in UBS Puerto Rico funds. This was very dangerous advice, because if the funds lost value, the investor’s losses would be even greater than they otherwise would have been due to the borrowings. Now that the funds have lost value, some investors have lost almost all of their investments, or even ended up owing the brokerage firms money!

Published on:

On October 21, the Financial Industry Regulatory Authority (FINRA) announced its decision to fine UBS Securities $12 million in securities arbitration. The fine is for charges of Regulation SHO violation and failure to supervise. UBS Securities did not properly supervise short sales and the result was millions of mismarked short sale orders, some of which were “placed to the market without reasonable grounds to believe that the securities could be borrowed and delivered,” according to the FINRA press release.

FINRA Decision: UBS Securities Fined $12 Million

Short sales occur when a security is sold by a seller that does not own it. When delivery is due, it is either purchased or borrowed by the short seller so that the delivery can be made. Regulation SHO requires that there are reasonable grounds for the broker-dealer to believe it could be borrowed and available for delivery. Regulation SHO reduces potential failures to deliver and states that broker-dealers must mark the trades as long or short. FINRA’s findings indicated that the supervisory system used by UBS was significantly flawed. Furthermore the flaws “resulted in a systemic supervisory failure that contributed to serious Reg SEO failures across its equities trading business,” according to FINRA documents.

FINRA’s investigation found that UBS Securities mismarked millions of sale trading orders, placed millions of short sale orders without locates and had significant aggregation unit deficiencies. Because of UBS’ supervisory failures, it wasn’t until after FINRA’s investigation and the resulting review of its systems and monitoring that many of its violations were corrected. According to FINRA, it wasn’t until at least 2009 that UBS’ supervisory framework was able to achieve compliance with certain securities laws, rules and regulations.

Published on:

Principal Protected Notes, or PPNs, are structured investments, meaning they connect the performance of commodities, equities, currencies and other assets to fixed income notes and CDs. PPNs are legitimate investments, though they have received a lot of negative attention lately. PPNs may have a full principal protection, but only partial principal protection is possible as well. In addition, PPNs can pay at their maturity in different ways, some paying a variable sum and others in coupons connected to a security or index. While PPNs are appropriate for many investors, there are risks associated with them.

Principal Protected Notes and the Lehman Brothers Debacle

The now infamous class action suit against Lehman Brothers has its roots in the claim that the risks associated with PPNs were not disclosed to investors. When Lehman Brothers filed for bankruptcy, the principal on the PPNs — for which Lehman was the borrower — became unprotected and investors were left with unexpected losses. According to claimants in the case, they were led to believe that as long as they held them to maturity, their PPNs were 100 percent principal protected. Claimants also say they were told that as long as their underlying indices maintained their worth, the PPNs were principal protected. Furthermore, the risks associated with PPNs were not disclosed and customers were not notified of the decline of Lehman Brothers which could affect the value of the investments.

The case against Lehman Brothers deals primarily with broker misconduct in misleading investors about the safety of their investments. However, if other allegations are true and firms truly pushed PPNs at the same time that they were reducing their own PPN holdings, it is a question outright broker fraud as opposed to failure to disclose.

Published on:

Once again, Wall Street insiders win and retail investors lose.

The outside advisers handling Lehman Brothers’ bankruptcy – mostly bankers and lawyers – have made over $1.4 billion for their services since Lehman Brothers went bankrupt three years ago.   If you’re a Wall Street insider, Lehman Brothers, which is bankrupt and out-of-business, is a fantastic place to work.

Meanwhile, investors holding Lehman Brothers structured notes are slated to get back only about one fifth of the money they invested in the notes when the Lehman Brothers bankruptcy litigation finally winds up.  Financial advisers at UBS and other brokerage firms peddled Lehman Brothers structured notes with great-sounding names like “100% principal protected” notes and “Return Optimization” notes.   But for investors getting back only twenty cents on the dollar, their principal wasn’t protected and their returns weren’t optimized.

Published on:

Both Lehman Brothers and UBS have had more than their fair share of bad press over the last three years, but are they cut from the same cloth? A recent article in Forbes makes the argument that they are. September marked the three-year anniversary of Lehman Brothers’ bankruptcy and the arrest of a UBS trader in London for fraud. When the world financial markets were shattered by the collapse of Lehman in 2008, many investors were left with annihilated life savings and retirement accounts.

Lehman Brothers, UBS and Wall Street Greed

Though it may appear that the most recent UBS incident and Lehman Brothers’ collapse are different events, according to Forbes’ article, “The players may be different but the rules are the same.” The “Delta One” trading desk used by the UBS trader and ETFs he was trading have a similar concept to the Lehman Brothers Principled Protected Notes sold by Lehman and UBS and both were excessively risky. Furthermore, UBS and Lehman worked cooperatively to dump the PPNs on investors, causing them significant losses.

Since the fiasco began, claimants been victorious in almost all securities arbitration cases against UBS and recovered their losses that resulted from the Lehman Structured Product Notes. However, criminal charges have not been brought against any Lehman executives, a measure of justice that is yet to be realized. According to an article in The New York Times, this is a case in which “brokers selling complex securities that they once contended were safe and sound have saddled individual investors with billions in losses since the credit bubble burst. Remember auction-rate securities? Those were peddled to investors as just as good as cash — until they no longer were after that market seized up in 2008.”

Published on:

Steven T. Kobayashi, a former financial adviser for UBS, was charged by the SEC on March 3, 2011. He was charged with misappropriating investors’ funds totaling $3.3 million.

Ex-UBS Employee Kobayashi Charged by the SEC

Allegedly, Kobayashi established a pooled life insurance policy investment fund, Life Settlement Partners LLC, and then solicited funds from many of his UBS customers. The problem, however, arose when he began using the funds as his own personal financing for gambling debts, expensive cars and prostitutes. Starting in 2006, Kobayashi spent at least $1.4 million on these personal and frivolous expenditures.

In an effort to cover his tracks, Kobayashi then defrauded more of his UBS customers, asking them to liquidate securities and transfer the money to more of his accounts in the fall of 2008. This second theft, which amounted to $1.9 million, was committed in an effort to repay Life Settlement Partners LLC before his initial theft was discovered. Kobayashi’s wrongdoings came to light when he could not pay the life settlement policy premiums on LSP and later when clients demanded their investment returns. A complaint was issued to UBS in September 2009 in which a customer accused Kobayashi of stealing hundreds of thousands of dollars from multiple accounts, including her own. The customer’s complaint went on to claim that he had forged documents and lied directly to investors about his intentions for their money. Kobayashi has not worked for UBS since the morning after the complaint was filed, when he tendered his resignation.

Contact Information