Erez Law filed three claims against UBS Financial Services Inc. and brokers Christopher Black (CRD# 2186558) and William Huthnance (CRD# 4326519) related to the UBS Financial Services Inc. Yield Enhancement Strategy (YES).
Christopher Black was a registered representative of UBS Financial Services Inc. in Houston, Texas, since 2015.
William Huthnance was a registered representative of UBS Financial Services Inc. in Houston, Texas, since 2015.
Erez Law Files Claim Against UBS Financial Services and Brokers Christopher Black and William Huthnance for YES Losses
In February 2022, Erez Law filed a FINRA arbitration against UBS Financial Services Inc., Christopher Black, and William Huthnance. The couple was a longtime customer and placed a high degree of trust and confidence in the firm and its brokers.
The Erez Law clients allege that they entrusted the brokers with most of their securities investments. The clients alleged that they informed the brokers that they were risk averse, looking for modest returns and were not interested in high-risk or speculative investments. The clients communicated to the brokers that they were most interested in preserving their capital and willing to forego higher returns to achieve this objective.
Their customers allege that in or about 2018, the brokers recommended a speculative and unsuitable proprietary investment strategy with unacceptable results.
Erez Law alleges that the brokers recommended that the clients invest in UBS’s high-risk and unsuitable Yield Enhancement Strategy (YES), which was targeting high net-worth investors to whom to sell its lucrative and fatally flawed strategy. William Huthnance was the couple’s primary contact. The clients had not requested nor sought from the brokers an investment to generate additional income in 2018 when they solicited the couple to invest in UBS Financial Services Inc.’s YES.
It is alleged that William Huthnance represented YES as a very safe strategy that allows investors to generate an enhanced modest yield of approximately 4% without requiring investors to deposit additional funds into their UBS YES account. Additionally, William Huthnance represented to the clients that many of his clients invested in YES and that he, too, was invested in YES. He also referred to YES’ track record as proof of the low risk inherent to YES. The clients had no experience with options and relied completely on Christopher Black and William Huthnance’s recommendations and representations.
The complaint alleges that contrary to UBS Financial Services Inc. and the brokers’ representations, YES was a high-risk and unsuitable leveraged strategy that involved a significant risk of loss of principal. By recommending that the clients have an excessively large mandate in YES, the risk to which they were unknowingly exposed was further increased. By failing to understand and appreciate the risks and characteristics of YES, the brokers violated the suitability rule, which requires financial advisors to perform sufficient due diligence to understand the investments they recommend.
One possible and most likely explanation for UBS Financial Services Inc.’s motivation for recommending YES is the significant fees it generated for the firm. UBS received an annual investment advisory fee of 1.75% on the mandate amount. The firm and its brokers were able to generate additional and excessive fees by selling YES to the clients and their other clients. The firm and its brokers generated fees in connection with the account(s) that served as collateral for YES and also generated a second layer of fees by recommending YES. They were able to generate two revenue streams from the same assets in what may be referred to as “double dipping.” It is alleged that UBS Financial Services Inc., Christopher Black, and William Huthnance breached their fiduciary duty by placing their interest before those of their customers, amongst other things.
According to the claim, immediately after the clients invested in YES, it sustained very large losses in excess of 13% in December 2018. The clients immediately complained that YES was not the very safe investment that Christopher Black had represented. By August 2019, YES had incurred additional losses. The clients decided to terminate YES. The clients terminated their relationship with the brokers and the firm due to their wrongful conduct related to YES.
It is alleged that UBS Financial Services Inc. failed to adequately disclose the significant risks associated with YES. UBS Financial Services Inc. failed to adequately disclose that YES was often not a market-neutral strategy. UBS Financial Services Inc. failed to adequately disclose that market volatility was often not the major determinant of YES’s profitability. UBS failed to adequately disclose that the clients were at risk of losing a significant percentage of the mandate allocated to YES.
Erez Law Files Claim for Clients Who Suffered UBS Financial Services Inc.’s YES Investment Losses
In February 2022, Erez Law filed a FINRA arbitration against UBS Financial Services Inc., Christopher Black, and William Huthnance for YES investment losses.
The Erez Law clients allege that they entrusted the vast majority of their securities investments in Christopher Black and William Huthnance. The couple informed the brokers that they were primarily interested in growth and secondarily income and that they had a moderate risk tolerance. The couple was not interested in high-risk or speculative investments.
Erez Law alleges that in or about early 2016, the brokers recommended a speculative and unsuitable proprietary investment strategy in UBS Financial Services Inc.’s YES with unacceptable results.
Just like in the case above, it is alleged that Christopher Black represented YES as a “low risk” strategy that allows investors to generate enhanced modest yield of approximately 5% without requiring investors to deposit additional funds into their UBS YES account.
Contrary to UBS Financial Service Inc.’s strict prohibition on financial advisors referring to YES’ past performance at Credit Suisse where the managers of the YES strategy were previously employed, Christopher Black provided the Credit Suisse YES past performance to the clients as a means of inducing them to invest in YES. He referred to the prior returns in which YES lost 1% in its worst year as proof of the low risk nature of YES and the tightly controlled risk measures in placed to preserve capital. It is alleged that the illicit Credit Suisse marketing piece that he provided to the clients also falsely represented that the YES strategy was “non-directional.” This was not true and a misrepresentation to the clients that was intended to communicate the low risk inherent to the strategy.
According to the claim, contrary to the brokers and UBS Financial Services Inc.’s representations, YES was a high-risk and unsuitable leveraged strategy that involved a significant risk of loss of principal. By recommending that the couple have an excessively large mandate in YES, the risk to which they were unknowingly exposed was further increased. Additionally, the size of the mandate rendered the recommendation even more unsuitable.
It is alleged that UBS Financial Services Inc. charged the couple approximately 1.50% annually of the “mandate” (i.e. the amount of collateral dedicated to the strategy).
Additionally, it is alleged that YES sustained very large losses in excess of 13% in December 2018, when the couple decided to terminate YES. The couple terminated their relationship with the brokers and the firm due to their wrongful conduct related to YES. UBS Financial Services Inc. failed to adequately disclose the significant risks associated with YES. UBS Financial Services Inc. failed to adequately disclose that YES was often not a market-neutral strategy. UBS Financial Services Inc. failed to adequately disclose that market volatility was often not the major determinant of YES’ profitability. UBS Financial Services Inc. failed to adequately disclose that the couple was at risk of losing a significant percentage of the mandate allocated to YES.
Erez Law Files Claim on Behalf of Elderly Client for YES Losses
In February 2022, Erez Law filed a FINRA arbitration against UBS Financial Services Inc., Christopher Black, and William Huthnance related to YES investment losses.
The Erez Law client, an elderly investor, alleges that he entrusted the firm and brokers with the majority of his securities investments. The client was a longtime client of Christopher Black and William Huthnance and placed a high degree of trust and confidence in the firm and brokers. The client was not interested in high-risk or speculative investments. In or about early 2016, the brokers recommended a speculative and unsuitable proprietary investment strategy with unacceptable results.
Their customer alleges that the client had not requested nor sought from the brokers an investment to generate additional income in 2016 when Black and Huthnance solicited him to invest in YES. Christopher Black represented YES as a low-risk strategy that allows investors to generate enhanced modest yield without requiring investors to deposit additional funds into their UBS Financial Services Inc.’s YES account.
Erez Law alleges that in soliciting YES to his clients, Christopher Black relied on YES’ past performance at Credit Suisse, where the managers of the YES strategy were previously employed. UBS strictly prohibited UBS financial advisors from using YES’ past performance at Credit Suisse in connection with their sales efforts.
Contrary to the firm and brokers, YES was a high-risk and unsuitable leveraged strategy that involved a significant risk of loss of principal. By recommending that the client have an excessively large mandate in YES, the risk to which he was unknowingly exposed was further increased. It is alleged that the size of the mandate rendered the recommendation even more unsuitable.
According to the claim, the firm and brokers breached their fiduciary duty by placing their interests before those of their customers, amongst other things. YES sustained very large losses in excess of 13% in December 2018, and the client terminated YES in 2019 and his relationship with the firm and brokers.
It is alleged that UBS Financial Services Inc. failed to adequately disclose the significant risks associated with YES. UBS failed to adequately disclose that YES was often not a market-neutral strategy. UBS Financial Services Inc. failed to adequately disclose that market volatility was often not the major determinant of YES’ profitability. UBS Financial Services Inc. failed to adequately disclose that the client was at risk of losing a significant percentage of the mandate allocated to YES.
Christopher Black Customer Complaints
In addition to the complaints above, he has been the subject of four additional customer complaints between 2019 and 2022, one of which was denied, according to his CRD report:
April 2020. “Time frame: 2015 – present Claimant’s counsel alleges unsuitability and misrepresentation with respect to recommendations to invest in and hold an options overlay strategy, hedge funds, structured notes, and private equity funds.” The customer sought $1.2 million in damages, and the case was settled for $580,000. The complaint was regarding in-house wrap fee, hedge funds, structured notes, private equity.
October 2019. “Time frame: Early 2017 – present Claimant’s counsel alleges unsuitability and misrepresentation with respect to recommendations to invest in and hold an options overlay strategy.” The customer is seeking $1.2 million in damages, and the case is currently pending. The complaint was regarding in-house wrap fees.
September 2019. “Time frame: 2016 – present Claimant’s counsel alleges unsuitability and misrepresentation with respect to recommendations to invest in and hold an options overlay strategy.” The customer sought $1 million in damages, and the case was settled for $305,000. The complaint was regarding in-house wrap fees.
William Huthnance Customer Complaints
In addition to the complaints above, he has been the subject of three additional customer complaints between 2019 and 2022, one of which was denied, according to his CRD report:
April 2020. “Time frame: 2015 – present Claimant’s counsel alleges unsuitability and misrepresentation with respect to recommendations to invest in and hold an options overlay strategy, hedge funds, structured notes, and private equity funds.” The customer is seeking $1,200,000 in damages, and the case was settled for $580,000. The complaint was regarding in-house wrap fees, hedge funds, structured notes, and private equity funds.
September 2019. “Time frame: 2016 – present Claimant’s counsel alleges unsuitability and misrepresentation with respect to recommendations to invest in and hold an options overlay strategy.” The customer sought $1,000,000 in damages, and the case was settled for $305,000.
How to File a Claim Against Christopher Black and William Huthnance
Erez Law represents investors in the United States for claims against brokers and brokerage firms for wrongdoing. 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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