According to Reuters, UBS has agreed to pay $120 Million to settle claims involving nearly $900 million in structured products. The claim alleges that UBS mislead investors about the financial condition of Lehman Brothers Holdings in connection with principal-protected notes that UBS underwrote and sold between 2007 and 2008. Additionally, in similar claims investors allege that despite Lehman’s worsening condition, UBS continued to push sales of these speculative notes knowing that Lehman’s ability to guarantee returns was questionable.
Lehman Brothers filed for bankruptcy in late 2008, leaving countless investors at the back of the line as creditors raced to recover funds. In general, principal-protected notes guarantee the return of at least the principal investment if the note is held until maturity. Unlike stocks that are subject to current market conditions, notes are tied to the financial condition of the issuer. By failing to disclose the deteriorating financial condition of Lehman Brothers Holdings, UBS violated securities regulation.
The Financial Industry Regulatory Authority (FINRA) fined UBS $2.5 million in 2011 for omissions and statements made that mislead some investors regarding Lehman Brothers principal-protection notes. In addition, FINRA ordered UBS to pay $8.5 million in restitution to investors. FINRA’s investigation found that UBS failed to adequately inform some investor that Lehman’s notes were subject to issuer credit risk, did not adequately analyze the suitability of sales to some and used advertising materials that were misleading to some investors.
Similarly, the Securities and Exchange Commission (SEC) sanctioned UBS with a $5.7 million penalty as part of a $50 million dollar settlement agreement for omissions and use of inaccurate marketing materials on certain investment offerings. For more on the SEC settlement, visit our previous blog post here.
According to Reuters, the $120 million dollar settlement agreement compares “favorably” with other recovery class action suits arising out of the 2008 financial crisis. Nevertheless, countless number of Lehman investors are still seeking the recovery of investment losses.
Brokerage firms have a fiduciary duty to their clients to provide adequate due diligence on any investment offered. Additionally, brokerage firms are required to only recommend investments that are suitable for clients given their age, investment experience, investment objectives, and net worth. Based on what is now known about Lehman structured products, and the allegations mentioned in the UBS settlement agreement, it appears that some brokerage firms violated securities regulations selling these product and may be liable for investment losses.
If you invested in principle-protection notes or other structured products offered by Lehman Brothers Holdings, and would like discuss your litigation options, please call securities attorneys of The White Law Group at (312)238-9650 for a free consultation.
The White Law Group is a national securities fraud, securities arbitration, and investor protection law firm with offices in Chicago, Illinois and Boca Raton, Florida.
For more information on The White Law Group, visit http://www.whitesecuritieslaw.com.