Earlier this week, FINRA announced that it fined UBS $2.5 million and ordered the broker-dealer to pay $8.25 million in restitution, as a result of "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." According to FINRA: "From March to June 2008 as the credit crisis worsened, UBS advertised and some UBS financial advisors described the structured notes as principal-protected investments and failed to emphasize they were unsecured obligations of Lehman Brothers, which eventually filed for bankruptcy in September 2008."
Further, FINRA said, "This matter underscores a firm's need to be clear and comprehensive in disclosing risks of the structured products it sells to retail investors. In cases, UBS' financial advisors did not even understand the complex products they were selling, and as a result, they neglected to disclose necessary information to customers about the issuer's credit risk so investors would understand the magnitude of the potential losses." Almost $1 billion of Lehman Notes were sold by UBS, and the $10.75 million ordered by FINRA represents about 1% of the value of those Notes.
Many investors of the Lehman Notes have filed claims in the Lehman Brothers bankruptcy proceeding, and are hoping to recover their losses in the Notes through that process instead of filing an individual securities arbitration claim against UBS. However, it is unclear how long that process will take, or whether investors will recover more than a nominal amount. Accordingly, investors should avail themselves of all remedies in attempting to recover their losses, including filing a securities arbitration claim against UBS. Further, investors should determine if they have to contend with any statute of limitations issues.
Additionally, while a class action lawsuit has been filed relating to the Lehman Notes, investors are reminded of the benefits of filing an individual arbitration claim, as opposed to participating in a class action lawsuit. To date, investors who filed claims against UBS in the FINRA arbitration forum have won seven of eight cases. The sole case which did not prevail was filed by a pro se investor. Collectively, the eight cases sought damages of $3,642,688, with Panels handing out 95% of that amount, or $3,461,438. Five of the seven successful cases won 100% of the damages sought. The other two cases won an average of 67% of the damages. The high win rate in these cases stands in stark contrast with the results obtained by investors from 2006 to 2010. During this time frame, investors won about 43% of the time.
