A class action lawsuit has been filed against UBS Financial Services, Inc. on behalf of all investors who were sold Lehman Brothers structured notes, also referred to as Lehman principal protection notes, by the brokerage firm.
The Lehman Brothers structured notes were a hybrid financial instrument, constructed from a combination of stocks, bonds, currencies, commodities and derivatives, which were sold as low-risk and safe investments.
UBS and a number of other brokerage firms sold the structured notes to retail investors with guaranteed principal protection from Lehman Brothers, which means that investors were assured that they would at least receive their initial investment back.
When Lehman Brothers filed for bankruptcy protection on September 15, 2008, the guarantee that the principal would be protected became meaningless, and the Lehman notes are now essentially worthless.
Many investors have reported that they were sold these Lehman structured notes even during the months right before the bankruptcy filing, and they were provided no indication that the investment bank had a severely weakened financial position as a result of heavy investments in the subprime mortgage market.
The UBS class action suit was filed last week 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.
The lawsuit seeks to cancel the UBS investors’ purchases of the Lehman Brothers notes, and to allow the investors to recover what they paid for the securities.
Similar cases are also being pursued as arbitration claims against UBS and other brokerage firms for recommending the notes without disclosing the full extent of the risk. The Lehman Brothers structured note arbitration claims are being reviewed by lawyers for investors who lost over $50,000, regardless of which brokerage firm sold the security.