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shutterstock_62862913-259x300Several large brokerage houses have been offering their clients option-based trading strategies referred to as a Yield Enhancement Strategy (YES).  These firms include UBS Financial Services, Merrill Lynch, Credit Suisse, and Morgan Stanley.   According to marketing materials, the YES strategy seeks to increase returns for investors through the trading of options.  These options trading program employ various options trading strategies including the iron condor.

The yield enhancement strategies present substantial risks for investors that some advisors may not be fully disclosing.  Options are complicated by their very nature and most investors lack the knowledge and experience in options, margin, puts, calls necessary to understand the relative risk reward trade offs associated with yield enhancement strategies.  Despite these risks Wall Street firms continue to push these strategies because they generate fees and commissions for the firm while investors shoulder the risk.

First, the name itself is misleading because yield enhancement strategy sounds as if income is going to be generated.  However, writing options and generating premiums is not income.  Its compensation for the risk of the option being written.  One of the most popular YES strategies, the iron condor, can allow an investor to generate a larger net credit relative to downside risk.

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shutterstock_120115444-300x198According to BrokerCheck records financial advisor Robert Berg (Berg), currently employed by Summit Brokerage Services, Inc. (Summit Brokerage) has been subject to at least three customer complaints and one bankruptcy.  According to records kept by The Financial Industry Regulatory Authority (FINRA), Berg’s customer complaints allege that Berg recommended unsuitable investments and securities.

In January 2019 a customer filed a complaint alleging that Berg violated the securities laws by, among other things, engaged in aggressive and speculative investment recommendations.  The claim alleged $75,000 in damages and is currently pending.

In April 2018 a customer filed a complaint alleging that Berg violated the securities laws by, among other things unauthorized withdrawal of funds. The claim resulted in an award or judgement of $16,400.

In March 2013 Berg declared bankruptcy.  Such disclosures on a broker’s record can reveal a financial incentive for the broker to recommend high commission products or services.  FINRA discloses information concerning a broker’s financial condition because a broker’s inability to handle their own personal finances has also been found to be material information in helping investors determine if they should allow the broker to handle their finances.

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shutterstock_120556300-300x300According to BrokerCheck records financial advisor Brian Thomas (Thomas), currently employed by Harbor Financial Services, LLC (Harbor Financial) has been subject to at least six customer complaints during the course of his career.  According to records kept by The Financial Industry Regulatory Authority (FINRA), Thomas’ customer complaints allege that Thomas recommended unsuitable investments and securities among other allegations.

In July 2017 a customer filed a complaint alleging that Thomas violated the securities laws by, among other things, made unsuitable investments, excessive and unauthorized trading resulting in damages from April 2015 through March 2017. The claim settled for $15,000.

In September 2011 a customer filed a complaint alleging that Thomas violated the securities laws by, among other things, breaching his fiduciary duty, negligence, and breach of contract from 1996 through November 2011.  The claim alleged $100,000 in damages and resulted in a settlement of $75,000.

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shutterstock_152933045-300x200According to BrokerCheck records kept by The Financial Industry Regulatory Authority (FINRA) broker Mohamed Yassin (Yassin) has been subject to at least two customer complaints, one employment termination for cause, and two regulatory matters during his career.  Yassin is formerly employed by Morgan Stanley and National Securities Corporation (National Securities).  The customer complaints against Yassin concern allegations of high frequency trading activity also referred to as excessive trading or churning.

In October 2018 FINRA alleged that Yassin failed to comply with an arbitration award or settlement agreement or to satisfactorily respond to a FINRA request to provide information concerning the status of compliance which triggered an industry bar and suspension.

In June 2017, Morgan Stanley discharged Yassin claiming that he failed to verbally confirm transactions prior to execution in clients’ accounts.

In April 2017 a customer filed a complaint alleging that Yassin violated the securities laws including excessive trading from 2012 until 2016 causing $2 million in damages.  The claim settled for $602,717.

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shutterstock_175835072-300x199According to BrokerCheck records financial advisor Scott Rosenberg (Rosenberg), currently employed by UBS Financial Services, Inc. (UBS) has been subject to at least three customer complaints during the course of his career.  According to records kept by The Financial Industry Regulatory Authority (FINRA), Rosenberg’s customer complaints allege that Rosenberg recommended unsuitable investments in what appears to be UBS’ Yield Enhancement Strategy (YES).

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.  The slide deck represents that the YES strategy has “limited correlation with the market or a single stock position, the YES Strategy may provide portfolio diversification.”  The strategy also claims to use upside and downside protection to prepare for “unexpectedly volatile market conditions” and that the options strategies are designed to limit risk.

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.

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shutterstock_92699377-300x285According to BrokerCheck records financial advisor Matthew Buchsbaum (Buchsbaum), currently employed by UBS Financial Services, Inc. (UBS) has been subject to at least nine customer complaints during the course of his career.  According to records kept by The Financial Industry Regulatory Authority (FINRA), Buchsbaum’s customer complaints allege that Buchsbaum recommended unsuitable investments in what appears to be UBS’ Yield Enhancement Strategy (YES).

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.  The slide deck represents that the YES strategy has “limited correlation with the market or a single stock position, the YES Strategy may provide portfolio diversification.”  The strategy also claims to use upside and downside protection to prepare for “unexpectedly volatile market conditions” and that the options strategies are designed to limit risk.

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.

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shutterstock_57938968-200x300The law offices of Gana Weinstein LLP filed a claim on behalf of a retired 66 years old widow concerning the mismanagement of her retirement savings.  The case alleged that Wells Fargo representative Allen Wilson (Wilson) recommended an overconcentration in unsuitable structured products that caused devastating losses to the Claimant’s portfolio jeopardizing her retirement.

Claimant alleged that she and her husband met Wilson in 2001 and for some time her savings were concentrated mostly in corporate and municipal bonds.  The Claimant alleged that she told Wilson that she was retired, collected social security, and wanted additional income from her accounts to cover expenses while preserving principal.  However, Wilson began recommending very complex structured products that the ordinary investor would not be able to understand.  These structured products were alleged to not be appropriate investments for income and a desire for preservation of capital.

The structured products at issue referenced two different bond yield curves and one stock market index in order to compute both if interest is owed paid and how much.  As alleged, a probability and statistics degree is needed to even begin to comprehend the probabilities of payment on this instrument.

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shutterstock_183544004-300x200According 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.

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shutterstock_143094109-300x200According to BrokerCheck records financial advisor Peter Bakalis (Bakalis), currently employed by D.H. Hill Securities, LLLP (DH Hill Securities) has been subject to at least two customer complaints, one employment termination for cause, and one regulatory investigation.  According to records kept by The Financial Industry Regulatory Authority (FINRA), Bakalis’ customer complaints allege that Bakalis failed to disclose a non-traded REIT merger and forged client signatures on paperwork.

In October 2018 Bakalis was terminated by his then employer Sigma Financial Corporation when the firm claimed that it has reason to believe that the representative forged, or instructed/caused others to forge, client signatures on account opening and account transfer paperwork.

Thereafter, in December 2018 the State of Michigan Department of Insurance and Financial Services opened an investigation claiming to have received a complaint on the appropriateness of annuity surrender/transfer for 3 different clients.

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shutterstock_836360-300x225Advisor Mark Lamkin (Lamkin), currently employed by Calton & Associates, Inc. (Calton & Associates) has been subject to at least three customer complaints and two terminations for cause.  According to a BrokerCheck report some of the customer complaints concern alternative investments and direct participation products (DPPs) such as non-traded real estate investment trusts (REITs), oil & gas programs, annuities, and equipment leasing programs.  The attorneys at Gana Weinstein LLP have extensive experience handling investor losses caused by these types of products.

In August 2018 Lamkin’s then employer, LPL Financial LLC (LPL) terminated Lamkin claiming that advisor received and/or benefited from loans from firm customers, failed to disclose and inadequately disclosed outside business activities, and personally engaged in and solicited other investors to participate in private investments without obtaining Firm approval.

In January 2019 a customer filed a complaint alleging that Lamkin violated the securities laws by making misrepresentations concerning an annuity product.  The claim is currently pending.

In April 2019 another customer filed a complaint alleging that Lamkin violated the securities laws by making misrepresentations and an unsuitable investment in a REIT security.  The claim is currently pending.

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