UBS Clients Furious That "Low-Risk" Retirement Investments From Lehman Now Almost Worthless

UBS reportedly sold its clients a ton of structured notes in Lehman Brothers, framing them as low-risk investments that would be good for retirement savings. Unfortunately, Lehman filed for bankruptcy making the notes virtually worthless.

Bloomberg: UBS AG, Switzerland’s largest bank, faces dozens of claims in the U.S. from clients who bought “100 per cent principal protected notes” issued by Lehman Brothers Holdings Inc. that are now almost worthless.

Six attorneys hired to represent clients in the cases say UBS brokers touted the so-called structured notes as low-risk investments and failed to emphasise they were unsecured obligations of Lehman, which filed for bankruptcy in September. State regulators are fielding so many calls about Lehman’s notes they’re considering a task force to investigate the sales, said Rex Staples, general counsel for the North American Securities Administrators Association Inc., a group of 67 state and provincial regulators based in Washington.

“The sales pitches were that it’s good for retirement accounts, and good for the safe, fixed-income part of people’s portfolios as an alternative to owning stocks, because it’s less risky,” said Seth Lipner, a lawyer in Garden City, New York, hired by two holders of Lehman notes sold by UBS, including a 65- year-old accountant who says he lost $1.4 million in retirement savings. “Of course, it turned out to be more risky.”…

Lehman’s Sept. 15 bankruptcy leaves holders of the notes waiting in line with other senior unsecured creditors for what’s left of their money. Notes with full principal protection are trading at 10 cents to 14 cents on the dollar, according to New York-based SecondMarket, which provides a marketplace for securities that are illiquid, or barely trade…

In the U.S., investors are starting to come “out of the woodwork” after learning in quarterly statements that their Lehman investments are almost wiped out, said Jeffrey Kaplan, a Miami lawyer who specialises in securities-arbitration claims.

“Our phone is ringing off the hook,” Kaplan said. “The vast majority of calls we’ve taken are investors with accounts at UBS.”


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