An arbitration panel has awarded more than $2.2 million to an investor as the result of a claim against UBS Financial Services over losses associated with Lehman Brothers principal protected notes.
The decision was announced late last month by the Financial Industry Regulatory Authority (FINRA), which is a non-governmental regulatory body that oversees more than 5,000 brokerage firms throughout the United States.
The panel determined that UBS must pay Thomas F. Motamed, and his wife, Christine, the full amount of losses they claimed were a result of investments in Lehman Brothers note products sold by UBS, including interest back to April 2008 and all of the fees for the arbitration.
Motamed, who is the chairman and chief executive of CNA, a major insurance company, accused UBS of breach of fiduciary duty and misrepresentation. FINRA rulings typically do not come with explanations of the panel’s decisions.
A number of arbitration claims and lawsuits over Lehman Brothers structured notes have been filed on behalf of investors who were sold the products by UBS and other brokerage firms. Lehman 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.
The $2.2 million award is the largest so far involving Lehman Brothers notes sold by UBS. The losses were the result of personal investments by the Motameds and unrelated to CNA.
A UBS class action lawsuit over Lehman structured notes was filed in 2008 in the U.S. District Court for the Southern District of New York, on behalf of all investors who were sold the investment by the brokerage firm. The complaint alleges that UBS brokers made false and misleading statements about Lehman Brothers Principal Protection Notes that omitted material facts about the risk associated with investing.
Individual investors are also 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. Many financial fraud lawyers investigating Lehman Brothers claims on behalf of investors indicate that most individuals are in a better position to recover their losses through FINRA arbitration.
Observers say that more UBS Lehman notes lawsuits could be coming from states and the Securities Exchange Commission could file criminal charges as financial law enforcement investigators look deeper into the brokerage firm’s practices in promoting and selling the notes.