UPS Employees with Leveraged, Concentrated Positions Could Recover Losses

by InvestorLawyers on July 10, 2013

in Arbitration,FINRA,Suitability

Investment fraud lawyers are currently investigating claims on behalf of UPS employees who suffered significant losses as a result of their concentrated position in UPS stock. A recent securities arbitration claim was filed with the Financial Industry Regulatory Authority’s Office of Dispute Resolution on behalf of one investor against Wells Fargo Advisors, seeking damages of $4,000,000.

UPS Employees with Leveraged, Concentrated Positions Could Recover Losses

The claim alleges that the claimant, a 40-year employee of UPS, acquired more than 234,000 shares of UPS stock through the company’s Employee Stock Purchase Plan and Manager’s Incentive Program.  A Hypothecation Loan was allegedly opened to facilitate the purchase of the stock, which was used as collateral for the loan. Reportedly, the investor reached a Note and Security Agreement with Wells Fargo when he moved his hypo loan to the firm.

Allegedly, Wells Fargo did not recommend a risk management strategy, such as a protective put and/or collar in order to protect the investor’s leveraged, concentrated position. Meanwhile, Wells Fargo used the UPS stock as collateral for loans to the investor. When UPS’ stock suffered a significant decline that dropped its value well below the loan-to-value ratio, the collateral call on the loan could have been prevented by a protective put option or collar. However, Wells Fargo allegedly facilitated borrowing against the investor’s concentrated stock position, while it was unprotected by a risk management strategy, in an effort to make money.

The investor’s UPS stock was, at one point, valued at more than $16,000,000. According to investment fraud lawyers, if Wells Fargo had recommended an appropriate risk management strategy, the sale of the investor’s UPS stock may not have been triggered by a collateral call and losses may have been avoided.

If you are a UPS employee who suffered significant losses because a stockbroker or financial advisor failed to recommend a risk management strategy to protect your concentrated, leveraged position in company stock, you may be able to recover your losses through securities arbitration. To find out more about your legal rights and options, contact a securities arbitration lawyer at The Law Office of Christopher J. Gray at (866) 966-9598 for a no-cost, confidential consultation.

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