The Financial Industry Regulatory Authority (FINRA) has just announced that it has fined UBS Financial, Inc. ( http://www.finra.org/Newsroom/NewsReleases/2011/P123479 ) $2.5 million and required UBS to pay $8.5 million in restitution to investors that were mislead about the “principal protection” of the Lehman Brothers note issued prior to Sept. 2008.
Investors who held Lehman principal protected notes in their portfolios may have noticed significant declines in their investments. If your financial advisor recommended the purchase of a principal protected note, and the purchase resulted in damages to your portfolio, you may be in a position to recover your losses.
FINRA oversees the activities of nearly 5,000 brokerage firms throughout the United States. Financial industry regulators have warned brokerage firms not to overstate the security of principal-protected notes (PPNs), which are not risk-free as their names often suggest. The reminder comes after a number of financial fraud lawsuits have been filed against brokers who allegedly sold the notes as conservative and safe investments without adequately disclosing the risks.
Bankruptcy and UBS Lawsuits
Once the fourth largest investment bank in the United States, Lehman Brothers filed for bankruptcy on September 15, 2008, marking the largest filing in history. The bankruptcy was caused by heavy investments in the subprime mortgage market, which many individual investors were not aware of when they purchased Lehman notes that were sold as “principal protected” securities.
There were over $8 billion worth of Lehman structured notes outstanding at the time of the bankruptcy, and approximately $2.8 billion of those were sold in 2008. Several investors have filed claims against their brokers alleging that they continued to recommend the Lehman Brothers “principal protected notes” (PPN) during the months leading up to the bankruptcy.
They claim the brokers knew, or should have known, that they were unsecured obligations of Lehman Brothers, whose financial position was declining. UBS AG, Switzerland's largest bank, faces hundreds of claims in the United States from clients who bought Lehman Brothers PPN.
What are UBS Lehman Structured Notes?
Structured notes, which are also known as hybrid financial instruments or structured equities, are investments that are constructed from a combination of stocks, bonds, currencies, commodities and derivatives.
The Lehman brothers notes were sold by brokers to retail investors as a low-risk and safe investment, which guaranteed 100% principal protection. Most of the investors who were sold these notes were of retirement age, and were looking for fixed income without the risks associated with stocks.
The Lehman Brothers bankruptcy left investors with Lehman structured notes holding basically worthless investments. Many of these investors are now contacting stock broker attorneys to help them file FINRA arbitration claims against the brokers who sold these Lehman structured products as conservative and safe investments.
How Do I Recoup Losses?
Many investors are now seeking to recover their losses from brokers who recommended Lehman notes without disclosing the full extent of the risks. Stock broker attorneys specialize in lawsuits resulting from investment misconduct. Please contact Peter Mougey at Levin, Papantonio, Thomas, Mitchell, Rafferty & Proctor, P.A. for a free consultation.
June 4, 2009
UBS AG, Switzerland’s largest bank, recommended unsuitable investments to clients who bought securities underwritten by Lehman Brothers Holdings Inc., New Hampshire securities regulators said.
March 17, 2009
Lehman Brothers Holdings Inc. (Lehman Brothers) serves the financial needs of corporations, governments and municipalities, institutional clients and high-net-worth individuals worldwide.
November 5, 2008
Lehman Brothers announced that its Chief Executive Officer, Richard Fuld, will leave the company at the end of the year. Fuld, who made $34 million in 2007, will not receive any severance or bonus upon his departure. Fuld was the company’s CEO from 1993 until the bankruptcy when the restructuring officer took over operations. When Lehman declared bankruptcy, it listed $613 billion in liabilities.
September 29, 2008
Before its bankruptcy, Lehman Brothers offered structured products called principal protection notes to risk-averse investors. Lehman promised that the products had “100 percent principal protection” as well as “uncapped appreciation potential.” While reviewing a brochure describing the products, Bloomberg.com found a risk factor noting that the notes will be subject to the credit risk of Lehman Brothers. Now that Lehman Brothers has declared bankruptcy, there is no one to protect the principal, and purchasers, who were sold principal protection notes by major brokerage firms like UBS, Merrill Lynch, and Morgan Stanley, face losing their entire investment.