October 15, 2015 Comments (0) Blog, Securities Fraud

Recovery of Losses from UBS’ V10 Enhanced FX Carry Strategy

(Last Updated On: March 31, 2017)

Have you suffered investment losses in UBS’ V10 Enhanced FX Carry Strategy? If so, the securities attorneys of The White Law Group may be able to help you recover your losses in a FINRA arbitration claim against the brokerage firm that recommended the investment.

UBS’ V10 Enhanced FX Carry Strategy exposes investors to movement in the G10 foreign exchange forward rates by attempting to take advantage of opportunities based on interest rate differentials between the currencies coupled with a complex switch that aims to profit during times of high volatility and risk aversion.

Traditionally, carry strategies attempt to take advantage of the failure of uncovered interest rate parity, which states that over time, an investor should not profit by borrowing in a low yielding currency and lending in a higher yielding currency, while leaving the resultant currency exposure unhedged. While it may be possible to profit from the interest rate differential and favorable currency moves, such long only carry trades are extremely susceptible to significant draw-downs, particularly during periods of high risk aversion.

UBS designed the V10 Enhanced FX Carry Strategy with a filter that attempts to anticipate such periods and switch positions accordingly in an attempt to profit from a seemingly adverse market environment. UBS ranks the G10 currencies by their one-month interest rates, and the three highest yielding and three lowest yielding currencies are selected. The strategy then takes long FX forward positions in the high yielding currencies and short FX forward positions in the low yielding currencies. If the volatility filter rises above a preset upper threshold, then all of the positions are reversed. The new position is then maintained until the volatility filter falls below a preset lower threshold, at which point the strategy reverts back.

The Department of Justice (“DOJ”) is currently investigating whether UBS misled investors in its marketing and selling of certain foreign-exchange structured products, including its V10 Enhanced FX Carry Strategy. Specifically, the investigation is looking into whether the bank misrepresented to its clients the profits that it was earning from commissions derived from the currency trades. The DOJ’s inquiry is scrutinizing whether UBS derived profits from switching positions and whether the company revealed these profits to its clients.

The White Law Group is investigating potential securities fraud claims involving broker-dealers’ improper recommendation that some investors purchase this investment. Brokerage firms that sell such products are required to perform adequate due diligence on the investments to ensure a reasonable likelihood of success, and to evaluate whether the investments are suitable in light of the client’s age, net worth, investment experience, and investment objectives. Firms that fail to perform adequate due diligence, or that make unsuitable recommendations, can be held responsible for losses in a FINRA arbitration claim.

If you suffered losses investing in UBS’ V10 Enhanced FX Carry Strategy and would like a free consultation with a securities attorney, please call The White Law Group at 888-637-5510.

The White Law Group is a national securities arbitration, securities fraud, and investor protection law firm with offices in Chicago, Illinois and Vero Beach, Florida.

For more information on The White Law Group, visit http://www.whitesecuritieslaw.com.