In April 2011, the Financial Industry Regulatory Authority (FINRA) fined UBS Financial Services, Inc. (UBS) $2.5 million and ordered the broker dealer to pay $8.25 million in restitution for false and misleading representations regarding the so-called “principal protection” feature of the 100% Principal-Protection Notes issued by Lehman Brothers Holdings, Inc. (Lehman PPNs) .
It began in February 2007 when UBS began serving as underwriter of Lehman Brothers issued PPN’s. By 2008, the credit crisis resulted in a substantial contraction of the U.S. financial markets, which impacted many financial institutions, including Lehman Brothers.
UBS knew that Lehman Brothers and other financial institutions had serious financial problems. Notwithstanding, UBS continued to underwrite the Lehman PPN’s and sell them through its sales force to its best customers.
After conducting its investigation, FINRA concluded that the UBS sales force did not understand the Lehman PPN’s and misled their customers. The reason for this misunderstanding was UBS’s failure to educate its financial advisors and ensure that they emphasize the credit risk of the Lehman PPN’s in their discussions with customers.
Further, UBS produced and distributed educational and marketing materials for its sales-force and customers that were confused with respect to the characteristics and risks of the Lehman PPN’s, including the nature, scope and limitations of the products so-called “100% Principal Protection.”
It has been documented that certain financial advisors at UBS clearly did not understand the source of the principal protection feature or its limitations.
They did not understand that the notes were unsecured debts of Lehman Brothers and the principal protection was contingent on its ability to meet its obligations at maturity.
Some financial advisors mistakenly believed that the zero coupon bonds supporting the Lehman PPN’s was a U.S. Treasury note. Many thought that UBS guaranteed the Lehman PPN’s, which it did not.
A few erroneously believed that UBS issued the Lehman PPN’s. Others were misled into thinking that the Lehman PPN had a separate bond component being held in escrow or some other segregated account, which was untrue.
And then there was a group of UBS financial advisors who believed that Lehman Brothers had purchased hedges to support the Lehman PPN’s, which was totally false.
There was widespread confusion at the brokerage firm, and if your financial advisor conveyed any of those false or misleading facts to induce your purchase of Lehman PPN’s, then you have the absolute right to make a claim and recover your losses for the UBS fraud.
There are other grounds for your claim against UBS and other financial institutions offering the Lehman PPN’s.
First and foremost, NASD Rule 2310 known as a “suitability rule” requires brokerage firms such as UBS and its financial advisors to have reasonable grounds for believing that the recommendation of the Lehman PPN’s were suitable for its customers based on their financial objectives, needs and condition.
During the period that the Lehman PPN’s were being offered, and to the extent they were being offered, to customers with “conservative” or “moderate” risk profiles, UBS and its financial advisors made unsuitable recommendations and violated an important securities industry rule and regulation.
These were not safe and secure investments matching those investors’ risk profiles.
In addition, UBS, through its financial advisors, made available to customers a “Client Strategies Guide” which contained information regarding the Lehman PPN’s that was not fair or balanced in its repeated description of the investment as having “100% Principal Protection;” “Principal Protection available only if the product is held to maturity;” and “100% principal protection at maturity.”
Similarly, if you received a copy of its “Structured Products: Strategies for Portfolio Diversification and Risk Management” guide, you received false information about your investment, and you should not accept the losses you suffered.
There are many more ways that UBS customers were defrauded in connection with the Lehman PPNs.
Unfortunately, the FINRA fine and restitution order will not compensate investors for the billions of dollars of losses. Nor will the class action filed against Lehman Brothers and the underwriters of the PPN’s.
There is no chance that the holders of the PPNs, unsecured creditors of Lehman Brothers, will recover their losses in the bankruptcy proceeding as well.
However, The Law Offices of Robert Wayne Pearce, P.A. will help you recover your losses in a FINRA arbitration proceeding conducted in this state where you reside.
Attorney Pearce has over 40 years of experience representing investors in FINRA arbitration proceedings throughout the United States.
His experience coupled with the facts revealed in the FINRA investigation will be your best opportunity to recover your losses providing you act quickly because the time is running out to file your claim.
The lawyers at our law firm are devoted to protecting investors’ rights throughout the United States and internationally!
Please visit our blog, post a comment, call 800-732-2889, or email Mr. Pearce at pearce@rwpearce.com for answers to any of your questions about losses you may have suffered in the Lehman Brothers PPNs or other note-linked structured products and/or any related matter.
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