Harvest Volatility Management Collateral is Facing Allegations Involving Fraudulent Sales of Collateral Yield Enhancement Strategy Investments

Harvest Volatility Management Collateral has been accused of making material misrepresentations and omissions regarding the risks of collateral yield enhancement strategy investments.

The Sonn Law Group is investigating allegations that Harvest Volatility Management Collateral sold its Harvest CYES investments based on material misrepresentations and omissions regarding the risks associated with the investments. Investors who relied on these misrepresentations and omissions may have suffered substantial losses due to making unsuitable investments, and these investors may be entitled to recover their losses. If you or a family member experienced losses investing with Harvest Volatility Management Collateral, we want to discuss your case. Please contact us today for a free review of your case.

Harvest Volatility Management Collateral

Harvest Volatility Management Collateral (Harvest) manages an options-based investment strategy that has been utilized by multiple brokerage firms, including Merrill Lynch and Morgan Stanley, referred to as Collateral Yield Investment Strategy (CYES).

CYES is a complicated and risky investment strategy that is often touted as a low-risk, high-reward investment, when in reality they create substantial risks for investors while essentially guaranteeing large returns for the firm selling them. 

Portfolios Relying on the Iron Condor

 Investors who utilize a CYES strategy have investment portfolios that rely on “iron condor” investments to enhance yield. An iron condor spread is constructed by selling one “call” spread and one “put spread” (same expiration date) on the same underlying instrument.

The call spread and put spread are of equal width. When an investor sells the call and put spreads, they are buying the iron condor. The cash collected represents the maximum profit for the position. All of these investments have the potential to fail and lose all of the investor’s capital.

Why CYES Investments are Complex

Because of the complexity of CYES investments, they should only be purchased by experienced, professional investors who have an aggressive risk tolerance. Harvest CYES is unsuitable for investors seeking stable returns. Investors can suffer extreme losses from volatility or drops in the stock market. 

Due to the high risk of these investments, the volatility of the current market is of special concern. A similar investment strategy was presented as low-risk by brokers at UBS Group (UBS) in 2018, according to Wall Street Journal. The strategy, called Yield Enhancement Strategy (YES) generated nearly $60 million in losses for investors during periods of heightened volatility in the market.

Because the strategy involved using borrowed money-as much as $5 was invested for every $1 the client put in-investors had to either sell their positions at a loss or contribute additional funds when the trades went against them. One inexperienced investor, who claims she was not informed of the risks of YES, lost over $750,000. 

Did Your Broker Recommend Harvest Volatility Management? Contact The Sonn Law Group Today

Pursuant to FINRA Rules, member firms are responsible for supervising a broker’s activities during the time the broker is registered with the firm. If a broker recommended a Harvest CYES investment, their brokerage firm may be liable for investment or other losses suffered.

The Sonn Law Group is currently investigating allegations that brokers recommended investments with Harvest Volatility Management Collateral. We represent investors in claims against negligent brokers and brokerage firms. If you or your loved one experienced investment losses, we are here to help. For a free consultation, please call us now 866-827-3202 at complete our contact form.

• Information for Investors: Harvest Volatility Management Collateral Yield Enhancement Strategy (CYES) (9/11/2019)