Erez Law is currently investigating recommendations by UBS Financial Services financial advisors across the country regarding investments in UBS Trigger Yield Optimization Notes.
UBS Trigger Yield Optimization Notes are convertible debt securities that provide investors with an increase in the price of stocks tied to that note. In the case of the UBS notes, there was a return cap between 8 and 11% plus the return on the invested principal. If the price of the stock linked to the UBS note dropped below the predetermined price by the note’s maturity date, investors would not see a return on principal and would instead receive stocks that were worth less than what they originally invested. These UBS notes were often linked to volatile energy and technology stocks.
UBS Yield Optimization Notes investments are speculative and unsuitable for many types of investors, especially elderly customers who are looking to preserve their principal and live off of interest made on those investments.
The Securities and Exchange Commission (SEC) settled claims with UBS related to its sale of structured notes such as UBS Trigger Yield Optimization Notes. In the settlement with the SEC, “UBS has agreed to pay more than $15 million to settle charges that it failed to adequately educate and train its sales force about critical aspects of certain complex financial products it sold to retail investors,” according to the SEC. “The SEC’s order finds that UBS failed to develop and implement policies and procedures reasonably designed to educate and train UBS registered representatives in connection with the sale of reverse convertible notes (RCNs) so that they could form a reasonable basis to make suitable recommendations.” The report explained that without adequate training, registered representatives made unsuitable recommendations in the sale of RCNs to retail customers despite their investment profiles or goals. In fact, UBS sold approximately $548 million in RCNs to more than 8,700 relatively inexperienced retail customers.
In one example of broker misconduct, a retiree alleges he lost hundreds of thousands of dollars as a result of investments in UBS Trigger Yield Optimization Notes. The customer alleges in his FINRA arbitration claim that his UBS broker used trading discretion to purchase the securities, without the customer’s consent or authorization. The securities in question were reverse convertible notes that exposed the investor to significant risk.
A broker must have reasonable grounds for each recommendation made to investors considering such factors as the customer’s other securities holdings, financial situation, and risk tolerance. In addition, before a firm offers a security to its customers, the firm must conduct due diligence, investigating the facts surrounding the security, to confirm that it is suitable for any customer of the firm. The suitability of an investment for a particular individual is at the center of the investment process and one of the key duties owed by a firm and its broker to the customer. A firm may be held liable for its failure to recommend suitable investments to its customers.
Pursuant to FINRA Rules, member firms are responsible for supervising a broker’s activities during the time the broker is registered with the firm. Therefore, UBS Financial Services, Inc. and brokerage firms across the country may be liable for investment or other losses from investments in UBS Trigger Yield Optimization Notes.
Erez Law represents investors in the United States for claims regarding losses sustained from investments in UBS Trigger Yield Optimization Notes. If you have experienced investment losses, please call us at 888-840-1571 or complete our contact form for a free consultation. Erez Law is a nationally recognized law firm representing individuals, trusts, corporations and institutions in claims against brokerage firms, banks and insurance companies on a contingency fee basis.
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