UBS Wins Another ‘YES’ Case, Broker Gets Expungement
UBS Wealth Management has prevailed against another wealthy investor who claimed he was defrauded by a misrepresented options strategy widely marketed through the firm, while his broker has won the right to have the complaint expunged from his regulatory records.
The customer sought $2.5 million in compensatory damages plus return of commissions, opportunity costs, punitive damages and legal fees, according to a decision posted on the Financial Industry Regulatory Authority’s dispute resolution website on Friday.
Scores of wealthy investors have filed similar complaints following losses that shaved as much as 40% from their portfolios if they remained through the coronavirus crash in March. But arbitrators in the three cases that have been decided to date have set a high bar for litigators to overcome once their client signs routine account opening disclosure documents, some lawyers said.
Miller, a longtime investment banker who runs global industry coverage at Barclays, could not be reached for comment. Patrick Smith, his lawyer at Smith Villazor in New York City, did not respond to requests for comment.
“Claimant was a very experienced investor,” the three public arbitrators wrote, referring to him as “head of banking operations” for Barclays N.A.
“While he maintained he was not sophisticated in this type of strategy, his signature and/or initials were present on papers describing the risk of the strategy and its volatility. We find that he was mailed the updated disclosure agreement. He stated he did not read much of the material he acknowledged.”
Jeffrey B. Kaplan, a Miami-based lawyer who represents investors in several pending YES arbitration hearings, said clients with Wall Street backgrounds are vulnerable to “sophisticated investor” defenses from brokerage firms. “Arbitrators are never that friendly to them,” Kaplan said.
The arbitrators in Miller’s case also cited evidence that his broker, William “Monty” Cerf, gave him opportunities to exit the YES strategy.
“The Panel relied on all of the disclosure exhibits that were filled out by UBS but signed and acknowledged by Claimant, the emails between Claimant and Cerf, including those in which Cerf advised Claimant to leave the YES strategy if he was not comfortable with the risk and the volatility in exchange for the potential earnings,” the arbitrators wrote in explaining their denial of the claim and approval of the expungement.
“While Claimant might have been unhappy, and not made as much profit as he could have otherwise, there was no wrongdoing on the part of Cerf. Claimant had numerous opportunities to leave the strategy and chose not to, when he could have minimized or erased his losses from YES.”
Cerf, who himself worked at Barclays before joining UBS in 2015, was not a respondent in Miller’s complaint. The arbitrators granted UBS’s request to expunge Millerr’s complaint from Cerf’s regulatory record.
Cerf, who has seven remaining YES-related allegations on his BrokerCheck history but no other disclosures, declined to comment when reached at his office number.
“I am comfortable that the options trading strategy, and how it operated within varying market conditions, were fully explained to the client,” he wrote on his BrokerCheck comment. “I am comfortable that this customer was treated fairly, the account was handled properly and that I acted in the best interests of the client at all times.”
The YES strategy was marketed to UBS advisors at internal roadshows by a team that UBS hired from Credit Suisse in 2015. Led by Matthew Buchsbaum, whose BrokerCheck record includes 29 customer complaints involving the strategy that went awry in volatile markets, the team received joint production credits for assets colleagues referred to it, according to Kaplan and other lawyers representing YES investors.
More than 75 claims have been filed against UBS over the YES strategy, primarily from very wealthy investors because of high account minimums. Although the first three cases in arbitration were decided in UBS’ favor, plaintiffs’ attorneys noted that each case is different.
“A sample size of three is not a valid sample,” said Kaplan. “Without knowing the specific details of the evidence, the arguments and the lawyers’ experience, you really can’t make heads nor tails of arbitration decisions.”
A UBS spokesman did not respond to a request for comment on the Miller decision.