According to BrokerCheck records financial advisor Jeffrey Klotz (Klotz), currently employed by UBS Financial Services, Inc. (UBS) has been subject to at least five customer complaints during the course of his career. According to records kept by The Financial Industry Regulatory Authority (FINRA), Klotz most recent customer complaint allege that Klotz recommended unsuitable investments in what appears to be UBS’ Yield Enhancement Strategy (YES).
In February 2019 a customer filed a complaint alleging that Klotz violated the securities laws by, among other things, making unsuitable investments and misrepresentation regarding an options overlay strategy investment. The claim alleges $300,000 in damages and is currently pending.
UBS created and advertised YES as an option-based trading strategy that sought to increase returns for investors. UBS brokers are alleged to have advertised the Yield Enhancement Strategy as involving trading call or put options to try and accomplish increased returns in their portfolios. Investors were often presented with slide presentation which advertised the Yield Enhancement program.
However, yield enhancement strategies are risky because any opportunity to profit relies on stock market stability – an impossible long-term scenario. When a stock index, such as the commonly used S&P 500, remains within a certain range the strategy can profit because the options purchased expire without reaching their strike prices. The investor earns a return from the option premiums.
The UBS YES program is alleged to have included the Iron Condor options trading strategy. The iron condor is an options strategy structure where investors write two short near money options and purchase two long out-of-the money options. While the YES strategy was marketed as a way to seek additional returns many investors instead suffered significant losses and margin calls instead.
Brokers are required under the securities laws to treat their clients fairly. This obligation includes the duties to disclose material risks of the investments they recommend and to present products, particularly complex or confusing products, in a fair and balanced manner that allows the client to evaluate the recommendation. Another important obligation advisors have is to make only suitable recommendations for investments to the client.
According to newsources, a study revealed that 7.3% of financial advisors had a customer complaint on their record when records from 2005 to 2015 were examined. Brokers must publicly disclose reportable events on their BrokerCheck reports that include customer complaints, IRS tax liens, judgments, investigations, terminations, and criminal cases. In addition, research has show a disturbing pattern with troublesome brokers where brokers with high numbers of customer complaints are not kicked out of the industry but instead these brokers are sifted to lower quality brokerage firms with loose hiring practices and higher rates of customer complaints. These lower quality firms may average brokers with five times as many complaints as the industry average.
Klotz entered the securities industry in 1981. Since December 2008 Klotz has been associated with UBS out of the firm’s New York, New York office location.
Investors who have suffered losses are encouraged to contact us at (800) 810-4262 for consultation. At Gana Weinstein LLP, our attorneys are experienced representing investors who have suffered securities losses due to the mishandling of their accounts. Claims may be brought in securities arbitration before FINRA. Our consultations are free of charge and the firm is only compensated if you recover.