NEW YORK, Dec. 10, 2009 (GLOBE NEWSWIRE) -- On September 11, 2009 Napoli Bern Ripka, LLP filed another claim against UBS for the sale of Lehman Principal Protected Notes. UBS AG, Switzerland's largest bank, faces numerous claims from clients who bought "100 percent principal protected notes" issued by Lehman Brothers Holdings Inc. that are now almost worthless.
UBS brokers touted the so-called structured notes as low-risk investments and failed to emphasize they were unsecured obligations of Lehman, which filed for bankruptcy in September. "UBS marketed the Lehman notes as suitable for those seeking principal protection -- clearly UBS was wrong about the notes," said one attorney at Napoli Bern Ripka.
According to a November 3, 2009 Bloomberg article titled "Lehman Good-for-Retirement Notes Worth Pennies for UBS Clients", state regulators are considering action, said Rex Staples, general counsel for the North American Securities Administrators Association Inc., a group of 67 state and provincial regulators based in Washington. Kristopher Kagel, a UBS spokesman in New York, said the bank "properly sold" Lehman's structured notes to its clients.
Banks and Wall Street firms create structured notes, sometimes marketed as "structured equities" or "hybrid financial instruments," through a combination of bonds, stocks, commodities, currencies and derivatives. Napoli Bern Ripka spoke to an independent structured products expert who asked not to be identified. "The problem with these assets is that they are not suitable for anyone," the expert stated. "These assets, if bought individually, would cost significantly less than if they were packaged together. So not only are the Lehman notes more risky than the marketing materials suggest, but even if they were safe, they would still be overpriced."
About a third of the $114 billion structured notes sold last year in the U.S. promised full or partial principal protection. The banks sold more structured notes to retail clients as the credit crisis made plain-vanilla bonds more expensive to issue. Approximately $8 billion of Lehman structured notes were outstanding as of September, including $2.8 billion sold this year.
UBS sold about $1 billion of Lehman's structured notes in America, according to Kagel. The largest brokerages -- Merrill Lynch, Citigroup's Smith Barney and Morgan Stanley -- weren't big distributors of Lehman's notes.
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