UBS’s Sale of Lehman Principal Protected Notes Was an Unmitigated Disaster for Investors

 

Investors who purchased Lehman notes from UBS have won seven out of the eight securities arbitration cases that have gone to a final arbitration hearing, which is an unusually high win rate, according to Dan Jamieson in his InvestmentNews article entitled “Sour notes from Lehman haunt UBS.” Most recently, a Financial Industry Regulatory Authority (FINRA) arbitration panel awarded $2,200,000.00 ? 100% of the compensatory damages requested ? to the Chairman and CEO of CNA Financial Corp. (Motamed v. UBS, decided December 2010). This award “shows that even a seemingly sophisticated investor ? at a disadvantage ? can win back his or her money.”

“Every time UBS loses one of these cases, the phones light up again,” said Seth E. Lipner, of Deutsch & Lipner in New York, who is co-counsel with Page Perry in Atlanta on Lehman structured note cases. In earlier cases (Edelson v. UBS, decided November 2010; Severi vs. UBS, decided in December 2009; and Marcus et al. v. UBS, decided April 2010), arbitration panels ordered UBS to buy back the Lehman principal protected structured products from investors at their original cost.

J. Boyd Page, the senior partner of Page Perry, noted: “This collection of arbitrator awards confirms just how egregious UBS’s activity was. Investors in these toxic notes are urged to take action if they haven’t already done so. Some investors were sold these Lehman notes in 2007 and 2008 are beginning to reach, or may have already reached, the four year anniversary of the purchase date. Further delay could result in time bar issues.”

Arbitrators are obviously not buying UBS’s main defense that all three rating agencies had an investment-grade rating on Lehman up to the bankruptcy. “UBS knew that Lehman was in trouble as far back as October 2007, but they continued to sell Lehman structured products anyway, ignoring the ever-growing risk,” Mr. Page observed, adding: “Not only weren’t they candid with the public, they weren’t candid even with their own brokers.”

“These are highly complex products; they are too complex for ordinary investors to evaluate. We have obviously been successful in proving that,” Mr. Lipner noted.

Page Perry, a law firm based in Atlanta, Georgia, is co-counsel with Mr. Lipner and his Garden City, New York law firm, Deutsch & Lipner, in representing investors in Lehman structured note cases.