NEW YORK--(BUSINESS WIRE)--The Securities Arbitration Law Firm of Klayman & Toskes (“K&T”), www.nasd-law.com, announced today that it is continuing to investigate claims against full service brokerage firms on behalf of current and former United Parcel Service (“UPS”) (NYSE: UPS) employees for losses sustained as a result of maintaining a concentrated, leveraged position in UPS stock. Many UPS employees who obtained company stock as a form of compensation, either through the employee stock option plan (“ESOP”) or employee stock purchase plan (“ESPP”), and later transferred it to a full service brokerage firm, were encouraged to take out a “hypothecation loan,” also known as a “hypo loan.” A hypo loan is obtained by pledging securities or other assets as collateral to secure a loan. In this case, the UPS stock served as collateral for the loan. Unfortunately, many UPS employees were never advised of the risks associated with maintaining a hypo loan, including the risk of a margin call. When the price of UPS stock declined, many UPS employees had their stock liquidated thereby decimating their investment portfolio.
Additionally, in many accounts, the UPS stock represented a concentrated position. However, many UPS employees were unaware of the risks associated with owning a concentrated account. Moreover, many brokerage firms failed to explain how the use of risk management strategies, like a zero-cost collar, protective put options, stop loss orders and/or an exchange fund, could have protected the concentrated UPS position.
The effects of margin on a concentrated stock position substantially increase the risk to the account. Once the account receives a margin call as a result of the decline in share price of the UPS stock, a forced liquidation of the stock can occur, which precludes the investor from recovering their losses through a potential rebound in the price of UPS stock. In many cases, had the investor not been on margin, the UPS stock would not have been liquidated to meet a margin call, thereby providing it with an opportunity to recover given that the price of UPS stock came back in value since 2009.
Current and former UPS employees who have sustained investment losses can contact K&T to explore their legal rights and options. The attorneys at K&T are dedicated to pursuing claims on behalf of investors who have suffered substantial investment losses. K&T, an experienced, qualified and nationally recognized securities litigation law firm, practices exclusively in the field of securities arbitration and litigation. It continues its representation of investors throughout the world in securities arbitration and litigation matters against major Wall Street brokerage firms.
If you wish to discuss this announcement or have investment losses of $250,000 or more in UPS stock, please contact Steven D. Toskes, Esquire or Jahan K. Manasseh, Esquire of Klayman & Toskes, P.A., at 888-997-9956 or visit us on the web at http://www.nasd-law.com.