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Published on: Handling Cases Against UBS Lehman Brothers Principal Protected Notes’s founder Christopher J. Gray is presently handling cases against UBS on behalf of investors who sustained losses various purportedly “Principal Protected Note” debt securities sold by brokerage firm UBS to its customers.
Brokerage houses, including UBS (UBS), Merrill Lynch (MER), Barclays (BCS) and Wachovia (WB) reportedly engaged in sales practices violations in which they compared Lehman Brothers principal protected notes and/or other structured investments to ultra-safe certificates of deposit and (in the case of UBS) reportedly assured investors that Lehman notes had a “guarantee” to repay all of her principal amount. Investors have reportedly won at least seven FINRA arbitration awards against UBS in these cases, and have reportedly not lost a single case in which the investor filing the claim was represented by an attorney.
Arbitration panels have agreed with attorneys advocating for defrauded investors on one key point: The stockbrokers’ assurances that the investments were safe, similar to certificates of deposit or “principal protected” were simply false. When an issuer goes bankrupt, as Lehman Brothers did, holders of structured notes are left standing at the back of the line with the other unsecured creditors and may recover little, if anything, of their original investment. Such is the case in the Lehman Brothers bankruptcy, in which structured notes investors are still waiting for payouts of a fraction of their initial investments.
According to a UBS sales brochure, the returns on structured products are linked to the performance of the relevant underlying asset or index. However, purchasers of Structured Products did not own a direct interest in the underlying assets or index. In reality, Structured Products were nothing more than unsecured debt obligations of Lehman Brothers, and thus investors’ ability to receive a return of principal was dependent upon the creditworthiness of Lehman Brothers.

Major brokerage firms, including UBS, Merrill Lynch, Barclays and Wachovia sold Lehman principal protected notes in recent years and reportedly pushed their sales forces to dump these products on their own retail customers so that the investment banking units of the banks could continue to reap fees by underwriting these lucrative products.
The sales practices violations were reportedly the worst when it came to Lehman Brothers principal protected notes that was misleadingly marketed as a “100% Principal Protection” note. This category of Structured Products, misleadingly promised to return some or all of the investor’s principal if held to maturity. UBS’ principal selling point in recommending the 100% Principal Protection Notes was safety. For example, a typical Structured Products Client Strategies Guide that UBS delivered to investors stated that the offerings provided “100% principal protection at maturity.” Another structured products brochure showed principal protection notes on the lower left of a risk/return graph and described them as appropriate for conservative investors who week to participate in the market and receive full or partial principal protection at maturity.
UBS marketed Lehman Brothers Principal Protection Notes to conservative investors who sought preservation of capital. In some instances investors were not even aware that their investments were loans to Lehman Brothers. It was not apparent from the trade confirmations and monthly statements that the investors had purchased a Lehman Brothers offering, as those documents described the security as “LB 100% PPN.” By March of 2008, UBS knew that Lehman Brothers credit condition was deteriorating. However, despite its own negative internal assessments, UBS continued to sell Lehman Brothers Structured Product Notes through August of 2008. The last offerings closed less than three weeks before the Lehman Brothers bankruptcy.
According to Bloomberg, investors held more than $8 billion in Lehman structured notes as of September, with $2.8 billion of those sold in 2008. UBS reportedly recommended and sold approximately $1 billion in Lehman Brothers principal protected notes.
While investors suffered massive losses, UBS made tens of millions of dollars underwriting fees on the $1 billion PPNs. Worse, executives at UBS told their financial advisors that Lehman’s financial outlook was healthy and urged brokers to sell PPNs to key customers; to even hang onto notes even after questions were being raised in the industry as to the financial health of Lehman Principal Protection Notes.
The Financial Industry Regulatory Authority (FINRA) previously issued a censure to UBS and a fine of $2.5 million. Since, FINRA ordered UBS to pay $8.25 million in restitution over its “omissions and statements made that effectively misled some investors regarding the ‘principal protection’ feature of 100% Principal Protection Notes (PPNs) Lehman Brothers Holdings Inc. issued prior to its September 2008 bankruptcy filing,” said FINRA. According to FINRA, many UBS advisers were unclear about these products, but sold the PPNs vigorously and irresponsibly, omitting critical information about Lehman’s credit and potential loss risks.
Investors who believe that may have been the victim of misrepresentations concerning structured notes by UBS or another brokerage firm may contact attorneys by filling out the form to the right or e-mailing

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