Page 46 - Investment Advisor July/August 2022

BROKER-DEALER BEAT

By Jeff Berman

UBS Must Pay Clients $1.4M Over YES

Options Strategy

Also, Raymond James restarts diversity push after pandemic lull.

BS Financial Services must requested that the statement of claim
pay $1.4 million to additional be dismissed in its entirety and with
Uclients who alleged that the prejudice, as well as expungement of
firm’s Yield Enhancement Strategy the matter from the Central Registration
(YES) — which focused on options- Depository records of William Mont-
based trading — was unsuitable and gomery Cerf, and any and all associated
inappropriate for their risk tolerance persons who may be affected by this
and investment objectives, according to claim. Both of the wirehouse’s requests
an arbitration award posted on FINRA’s were denied by the panel.
website on Wednesday. Cerf, a registered broker and advi-
Included in the award by a three- sor for UBS since 2015, according to
person panel of public arbitrators in his report on the Financial Industry
Albuquerque, New Mexico, was $1.1 Regulatory Authority’s BrokerCheck
million in compensatory damages breach of fiduciary duty, negligence, website, did not immediately respond to
that included $933,092 for out-of- failure to supervise, and breach of con- a request for comment. In his 26 years in
pocket losses and $176,393 in prejudg- tract under the federal securities laws, the sector, he has been the subject of six
ment interest. FINRA regulations, applicable New client disputes, according to disclosures
The $1.4 million also included $26,148 Mexico state securities laws and appli- on his BrokerCheck report. Five of them
in costs related to expert witness fees, cable common law. are still pending.
$311,031 in attorneys’ fees based on con- The causes of action related to UBS’s
tingent fee retainer and pursuant to Yield Enhancement Strategy, a man- PRIOR YES DISPUTES
New Mexico statutes, and $425 as reim- aged-account options strategy product. There have already been many disputes
bursement for the nonrefundable filing In the statement of claim, the claim- between UBS and clients over the YES
fee previously paid to FINRA Dispute ant requested compensatory damages strategy. Of the 29 cases believed to
Resolution Services. of about $1 million, including recovery have gone to a decision so far, UBS
UBS did not immediately respond to a of all trading losses, margin interest and prevailed in 15, while the claimants
request for comment. fees received by UBS. received at least some compensation in
“As a general matter, our clients and The claimant also requested recov- the other 14.
we are very pleased that the FINRA ery of pre- and post-award interest, In early May, an arbitration panel
arbitrators recognized UBS’s miscon- costs, expenses, attorneys’ fees, expert ordered UBS to pay $2.9 million in
duct in the marketing and implemen- fees, and forum fees of the arbitration; compensatory damages plus nearly
tation of the YES strategy,” Jeffrey and unspecified punitive damages “to $966,000 in legal fees to additional cli-
B. Kaplan, a partner in the law firm punish and deter Respondent from any ents who alleged that the firm’s YES
Dimond Kaplan & Rothstein that rep- future similar conduct.” strategy was unsuitable and inappropri-
resented The David and Heather At the hearing, the claimant request- ate for their risk tolerance and invest-
Weir Family Trust, the claimant, told ed compensatory damages of $1.1 mil- ment objectives.
ThinkAdvisor by email. lion, plus attorneys’ fees of $369,828, In March, a FINRA arbitration panel
punitive damages of $3.3 million, filing ordered UBS to pay nearly $1.2 million
FRAUD AND NEGLIGENCE ALLEGED costs of $1,725, and expert witness fees in compensatory damages plus interest
In its statement of claim, the claimant of $26,148. The arbitration panel didn’t to clients who alleged the YES strategy
asserted that UBS was guilty of fraud, award the expert witness fees. was misrepresented to them and wound Adobe Stock
misrepresentation, unsuitable product, In its statement of answer, UBS up exposing them to risk of loss.

44 INVESTMENT ADVISOR JULY/AUGUST 2022 | ThinkAdvisor.com