Did You Lose Money In The AllianceBernstein Options Advantage Program?

Silver Law Group is investigating claims involving the AllianceBernstein Options Advantage Program, where investors were offered the opportunity to earn additional return on already-invested funds. The firm’s financial advisors allegedly sold this program as low risk and low volatility, but many investors suffered significant losses.

Many investors claim they were told that they could earn an additional 1% to 2% return on assets they’d previously invested in the firm. The so-called “cash-free” option involved using margin to avoid having customers add additional funds to their account. The idea was that using margin would make it less risky to the investor. The existing stocks, bonds, mutual funds, or other investments became the collateral for borrowing on margin.

Reports allege that Bernstein engaged in the purchase and sale of a range of S&P 500 call and put options, leading to significant financial losses for numerous investors.

As part of the agreement, some investors in Option Advantage Strategy were required to pay Alliance Bernstein a management fee of 0.25% on the collateral used to secure the underlying margin loan. Additionally, an incentive fee of 20% (capped at 1%) was paid to Alliance Bernstein for achieving positive performance.

Many investment firms offered their investment clientele different options to increase their portfolios during the low-interest period from 2009 through 2021. Alliance Bernstein allegedly failed to test the strategy during periods of volatility amongst other factors. Unfortunately, the market became much more volatile in 2022, leaving many investors with significant losses. The firm finally closed the program in October of 2022.

Why Did The AllianceBernstein Options Advantage Program Fail?

According to some investors, despite what they presented to the investors, Bernstein, exercising their discretion, engaged in market speculation by trading call and put options on the S&P 500. However, these trades soon transformed into a series of high-risk wagers on market direction, leveraging margin to amplify potential gains. Investors were not fully briefed on this type of investment, the potential for risk, and the losses they could incur.

Unfortunately, this strategy, later acknowledged by Bernstein, was ill-suited for the now-volatile markets. Investors suffered substantial losses right from the inception of the strategy while the advisors attempted to pacify their investors. When the market became more volatile in 2022, investors began losing even more significant sums, along with the fees owed to the firm for the management of their “investments.”

FINRA Arbitration Claim For AB OAP

One couple who lost money in this “cash-free” investment have filed an arbitration claim through FINRA to recoup their losses.

In 2018, their advisor recommended that they begin investing in the Option Advantage Strategy as a “low risk” investment that was actually rather complex. The couple, based in Utah, now claim that their advisors continually misrepresented material information from the outset in 2018 through October of 2022, when the program ended.

During the entire period, AllianceBernstein continued to collect fees, increasing in amounts, throughout the program. The couple eventually lost nearly $500,000, including broker fees and margin interest, for which they are seeking reimbursement through their claim.

Margin Calls

Investors who aren’t familiar with the use of margin may not have completely understood what they were getting into with this program. With the use of margin, an investor “borrows” against their deposited assets. If the value of the assets declines, and there isn’t enough money in your brokerage account to cover it, the broker can sell your assets without your permission. You’ll be responsible for the remaining monies owed, just like any other loan balance.

As we’ve blogged about before, buying and investing on margin isn’t for the novice investor. An investor could lose a considerable amount of their investment quickly, since working on margin involves a significant amount of risk.

Did You Invest With AllianceBernstein Options Advantage Program?

If you’re one of the investors who lost money with AllianceBernstein’s Alliance Options plan, we want to talk to you. We can work with you to help recoup your losses, possibly with a FINRA arbitration claim.

Silver Law Group represents investors in securities and investment fraud cases. Our lawyers are admitted to practice in New York and Florida and represent investors nationwide to help recover investment losses due to stockbroker misconduct. If you have any questions about how your account has been handled, call to speak with an experienced securities attorney. Most cases are handled on a contingent fee basis, meaning that you won’t owe us until we recover your money for you. Contact us today at (800) 975-4345 and let us know how we can help.