UBS Must Pay Couple $530,000 for Lehman Brothers-Backed Structured Notes

A Financial Industry Regulatory Authority arbitration panel has ordered UBS AG to pay two clients $529,688 over their purchase of Lehman Brothers Holdings notes. The investors, Steven and Ellen Edelson, were told that they were buying “structured products, some of which were “principal protected.”

Between 2006 and 2008, the Edelsons, who used to own a plumbing supply company, purchased some $3.5 million in structured products—$529,688 of which came from Lehman. They even purchased the Lehman notes as late as August 2008, just a month before the bank failed.

Some of the Lehman notes that they bought were called “Return Optimization Securities with Partial Protection,” and “100% Principal Protection Notes” (PPN). According to the couple’s securities fraud lawyer, the Lehman notes are now valued at pennies on the dollar). Their attorney contends that by calling the notes “principal protected,” UBS misrepresented the risks involved in investing in the structured notes.

According to, Lehman’s structured notes were supposed to perform like an S&P 500 index or a basket of securities. However, the PPN should be different from either in that the investments—in return for the financial security—would be capped. Unfortunately, as investors found out in September 2008, there were “principal protected” investments that did not live up to their name because they lacked that inferred protection.

UBS maintains that it followed “regulatory requirements” when it sold Lehman notes and that it could not have foreseen the latter’s financial collapse. Meantime, FINRA has ordered the investment bank to repurchase the notes from the retired couple.

Securities Fraud Against UBS Over Lehman Products
UBS has reportedly sold $1 billion of Lehman products to US investors. In six of the seven cases alleging securities fraud that were decided through FINRA, UBS must now repay some or all of the losses sustained by the investors.

Related Web Resources:
UBS loses arbitration case over ‘principal protected’ notes, Investment News, November 4, 2010

UBS Having Hard Time With Lehman Structured Products Arbitration, Forbes, April 26, 2010

UBS Loses Lehman Arbitration Note Claim by Small Investor, Stockbroker Fraud Blog, December 9, 2010

Brokers Renew Push for Investors to Buy Structured Products, Stockbroker Fraud Blog, June 12, 2009

Our securities fraud law firm can help you determine whether you have grounds for an institutional investment fraud case.