An investor has been awarded $200,000 in a stockbroker fraud claim against UBS Financial Services over the sale of Lehman Brothers structured notes, which were rendered virtually worthless after the September 2008 collapse of the investment bank.
The arbitration claim was filed through the Financial Industry Regulator Authority (FINRA) by Patricia Flanagan, who originally sought $300,000 in compensation for losses involving Lehman Brothers notes, which were sold as a conservative and safe investment. This is one of the first Lehman Brothers awards arising out of the sale of the notes by UBS and other brokerage firms.
Lehman Brothers structured notes were a hybrid financial instrument, constructed from a combination of stocks, bonds, currencies, commodities and derivatives, which were promoted by many brokers as low-risk investments, even as Lehman Brothers faced substantial financial troubles. Although investors were told that the notes carried a guaranteed principal protection, that guarantee became worthless when Lehman filed for bankruptcy protection on September 15, 2008.
FINRA is a non-governmental regulatory body that oversees more than 5,000 brokerage firms throughout the United States. Investors are able to resolve disputes against brokerage firms through FINRA for claims involving breach of fiduciary duty, negligence, misrepresentation, breach of contract, unauthorized trading and other claims that investments were improperly handled.
Flanagan’s UBS broker bought a $225,000 guaranteed principal protection note and a $75,000 return optimization note for Flanagan. The three-person panel overseeing the case ruled that Flanagan should be compensated $150,000 plus interest and attorneys fees for the guaranteed principal protection note, for a total of about $200,000. However, she was not compensated for the return optimization note.
A UBS class action lawsuit was filed last year in the U.S. District Court for the Southern District of New York, on behalf of all investors who were sold Lehman Brothers Principal Protection Notes by the brokerage firm. The complaint alleges that UBS brokers made false and misleading statements that omitted material facts about the risk associated with investing in the Lehman structured notes. However, according to financial fraud lawyers investigating Lehman Brothers claims on behalf of investors, most individuals are in a better position to recover their losses through a FINRA arbitration claim.