NEW YORK, Nov. 20, 2008 (GLOBE NEWSWIRE) -- Swiss-based UBS AG (NYSE:UBS) is facing more legal problems based on its sales of Lehman Brothers Principal Protected Notes. With Lehman Brothers in bankruptcy, the notes are likely worth a fraction of their original value, if anything at all. Shepherd Smith Edwards & Kantas LLP (www.sseklaw.com), is currently representing a number of UBS clients alleging the firm marketed structured notes, sometime referred to as guaranteed linked notes as low-risk, conservative investments which were designed to preserve capital.
Structured notes can best be described as financial instruments that combine derivatives with equity or fixed income investments. The derivative component can be composed of securities, options, indices, commodities, debt issuances, foreign currencies, or credit swaps. According to many UBS customers, what UBS and its agents failed to mention was the notes in question actually were unsecured obligations of Lehman Brothers. This left investors unknowingly vulnerable to considerable amounts of risk.
Apparently, these structured notes were sold just days before Lehman Brothers declared bankruptcy on Sept. 15, 2008. Amazingly, the notes reportedly were being used by Lehman Brothers to bail itself out its own financial mess from the firm's exposure to bad bets on subprime-related investments. Arguably, UBS and other marketers of these securities must have had some idea Lehman Brothers was in trouble, which means investors may have knowingly been placed in a product whose principal was backed by a fundamentally unsound company. At the very least the investor was unaware of the danger if the client was assured the investments were safe.
Reportedly, UBS sold about $1 billion of Lehman's structured notes to investors. Based on contact with several of these investors, it seems many of them were retirees who sought capital preservation and a modest income. Now, despite the fact investors were told that the Lehman Principal Protected Notes had "principal protection" and were "100% guaranteed," investors can expect to receive very little back for their investment. Sources state, the notes that once promised full principal protection are now trading at less than 10 cents on the dollar.
This latest fiasco relating to Lehman Brothers Principal Protected Notes adds to what has become a growing list of legal problems for UBS. Earlier this year, the company had to pay out nearly $20 billion related to charges over auction-rate securities sales. It is also under investigation by the Securities and Exchange Commission (SEC) for the sale of derivatives and investment contracts to state and local governments. State regulators are also considering forming a task force to investigate brokerage firms that marketed and sold structured notes to investors.
Shepherd Smith Edwards & Kantas LLP is already representing numerous investors who have been caught in this latest financial trap. Over the next few months, the firm anticipates filing dozens of cases for investors nationwide working to help those wronged investor to recover some or all of their losses.
Shepherd Smith Edwards & Kantas LLP has a team of attorneys, consultants and staff with more than 100 years of combined experience in the securities industry and in securities law. Since 1990, we have represented thousands of investors nationwide to recover losses. We have represented clients in Federal and state courts and in arbitration through the Financial Industry Regulatory Authority (FINRA), the New York Stock Exchange Inc. (NYSE), the American Arbitration Association (AAA) and in private arbitration actions. Collectively, we have represented over 1,000 investors during the last 18 in negotiation, mediation, arbitration and litigation.