Bernstein’s Proprietary “Options Advantage Strategy"


The Sales Pitch: This Proprietary Options Strategy was purportedly a way to take advantage of the volatility in the markets in a way that was low risk. What was so troubling about this representation is that Bernstein allegedly recommended that its own clients borrow money from Bernstein to invest in this and then effectively make a little extra money because the fund was designed to make a little more than the loan was costing the investor. This kind of bad idea is often only effective when a firm that is well respected, like Bernstein, markets the product based on claims that they have both thoroughly vetted and have the sophistication to manage the strategy. Bernstein fell far short of its representation and knew or should have known this pitch would be appealing to low risk and fixed income investors, who are the least interested in speculating. It is believed that Bernstein kept its brokers in the dark on the true risks of the strategies employed.

What happened: Although Bernstein claimed the product was well researched and had a track record of producing solid results, these representations are now being called into question given the dramatic losses suffered through the strategy in 2022. Following the staggering losses, Bernstein reacted by shuttering down the entire project. Investors were exposed to unparalleled risk for minimal potential returns. Speculative strategies with limited upside are often doomed to fail. Bernstein’s clients were not informed that they were picking up pennies on the train tracks.

Our view of the wrongdoing: We believe that Bernstein’s proprietary traders morphed its advertised and represented option strategy by speculating on the market direction using both call and put options on major market indexes, and, as a result, substantial losses were incurred. In addition, it is believed that the financial advisors and brokers who recommended the Options Advantage Strategy may have also been misled by Bernstein.

One of the most troubling aspects of the wrongdoing: In addition to the fact that this appears to be institutional wrongdoing, and that Bernstein allegedly financially motivated its advisors to push this defective product, it also appears that they were endorsing a practice of recommending that clients borrow money from Bernstein to invest in this options strategy. We consistently speak and post articles on how margin can make any strategy far more risky and financially devastated, so we are especially troubled by this practice which put the risk to the investor on steroids while also appearing to be simultaneously putting more money in the pockets of Bernstein and its advisors.

What often comes to light in these situations: We refer to this as an institutional wrong, rather than a situation in which and individual advisor went rogue due to lack of supervision. As we dig into these situations, we often find that financial advisors begin to come forward to explain how they were misled and how these same financial advisors admit to receiving an extra financial benefit from recommending the product at issue. This financial incentive effectively creates a troubling and significant conflict of interest in which the financial firm is pushing the product on the investor.

Timeline: Usually about a year from the time you hire us to the time a result is achieved through settlement or an arbitration award. Bigger cases sometimes take longer, and, in some cases, a settlement can be reached much sooner if the case is approached in the right way by your attorneys.

Your personal commitment: You will need to provide several documents that relate to your financial situation as Bernstein will assert this is relevant to your claims. Although you will not be deposed (as often occurs in our court cases), you will need to testify at the final arbitration hearing if we are not able to settle your case in advance of the final arbitration hearing.

Your financial commitment: We represent investors who pay us a contingency fee based upon the results achieved and some who pay us by the hour, or a blend between the two arrangements. We find that investors with large enough losses sometimes prefer the hourly arrangement, but most clients often prefer to pay us contingent upon the results we obtain. The contingent arrangement involves us advancing the hard costs associated such as FINRA filing fees and other related costs. We then recover those costs plus our contingent attorney fee from the amount recovered through settlement or arbitration award.

What we will do for you: As your attorney, we will examine your entire portfolio to determine whether there has been any other alleged wrongdoing by Bernstein in handling your account and determine if your claim is viable. If it is a viable claim, then we will set out to achieve the optimal outcome. We will keep you informed on our litigation strategies and apprised of important details of throughout the process. We will assist you in responding to any discovery demands made upon you. We will pursue a potential settlement prior to arbitration and provide an analysis of whether it is better to resolve your claim or take the case to arbitration.

How we are different: Our experienced team is comprised of former prosecutors, college athletes, along with a robust support team who are dedicated to only represent those wronged in the financial world. Like David, in David and Goliath, we have the experience, expertise and stamina to go toe to toe with the big financial institutions and powerful law firms that represent them. As our client, you will be an integral part of the legal team in this battle. We form close bonds as our clients’ become friends, it is not unusual for our clients to have our personal mobile numbers.

The good and bad news: From our perspective, Bernstein is a financially sound organization that is not likely to go out of business or declare bankruptcy due to the mass marketing this allegedly defective product. We believe that we will be able to collect any money for you that an arbitration panel determines that Bernstein owes you. The bad news is that a financially sound organization such as Bernstein have the financial ability to hire the best attorneys and experts to fight you should they choose to vigorously defend these cases.

What we recommend in selecting a law firm: We recommend you hire a law firm that has the depth to take on any big law firms and experts hired by Bernstein and that not only has significant experience with FINRA arbitrations but is not completely dependent on settling all its Bernstein cases to pay its bills.

What’s next: If you have experienced losses due to Bernstein and the Options Strategy product, we would be happy to discuss your options with you and help you navigate your next steps. Please fill out the form below, visit our Securities Litigation page or call (239) 319-4434 and ask for Chris or Pam, we make every effort to personally answer our phones, but if you happen to end up in the auto attendant select 2 to go straight to Chris and Pam.

Related Posts
  • Vernon Litigation Group Files FINRA Arbitration claim against Ameriprise related to Melbourne Financial Advisor Scott Roslonowski Read More
  • FINRA Annual Report Shows 44% Increase in Fines in 2020 Read More
  • The Importance of a FINRA BrokerCheck Read More