Time continues to run out for investors to file FINRA arbitrations

It has been nearly three years since Lehman Brothers filed the largest bankruptcy in U.S. history. Since that time, brokerage firm UBS Financial Services has lost numerous legal and regulatory battles over its marketing and sales of more than $1 billion in risky Lehman Brothers securities. In the meantime, the time that investors have to file a FINRA arbitration claim against UBS to recover Lehman Brothers structured product investment losses continues to run out.

Securities Regulators, Courts, and Arbitrators Have Found that UBS Misled Investors

First, the New Hampshire securities regulators sued UBS for unfair sales practices in marketing and selling Lehman structured products, including so-called "principal protection" notes. The regulators accused UBS of exaggerating the safety of these Lehman notes, which became largely worthless when Lehman Brothers filed for bankruptcy protection. The New Hampshire Bureau of Securities Regulation said that UBS misled investors when it represented that the Lehman Brothers investments were safe. It also accused UBS of engaging in "dishonest and unethical business practice" in the marketing and selling of Lehman Brothers structured products.

Then, in April 2011, the Financial Industry Regulatory Authority (FINRA) fined UBS millions of dollars and ordered UBS to pay millions of dollars to investors after finding that UBS had misled investors about "principal protection" notes.

Most recently, the federal judge presiding over a massive class action pending against UBS ruled that the offering documents for the Lehman Brothers "principal protection" notes were false and misleading. The judge from the federal court in the Southern District of New York, the most active and prominent federal district court for securities litigation cases, ruled that the written risk disclosures in the offering documents were inadequate as a matter of law. This ruling is a huge blow to UBS, which had been arguing that the risk disclosures sufficiently warned investors of the risks of the securities.

Finally, since Lehman Brothers went bankrupt, many investors have filed FINRA arbitration claims against UBS to recover their losses in Lehman Brothers structured products, including Lehman "principal protection" notes. All but one of the cases that have gone to a final hearing have resulted in significant damage awards to the investors. The one case that resulted in no damage recovery involved an investor who unwisely filed and tried their case without a lawyer.

The crux of investors' complaints against UBS is that UBS misled investors by misrepresenting the safety of the Lehman Brothers notes. By the frequency and amount of the arbitration awards, it appears that arbitrators have agreed with investors and come to the same conclusions as those of the State of New Hampshire, FINRA, and the judge in the class action against UBS, i.e., that UBS misled investors.

One of the more disturbing aspects of UBS's conduct is that at or about the time that UBS was recommending that retail investors invest in Lehman Brothers securities (all while failing to disclose the enormous risk of Lehman securities), UBS was advising it large institutional customers to sell Lehman Brothers securities and even to buy credit default swaps on Lehman Brothers, which served as a bet that Lehman Brothers would default on its debt. In short, UBS gave conflicting advice to its retail customers and to its larger institutional clients. UBS appears to have done this in an effort to protect its profitable and cherished institutional clients, at the expense of retail investors.

Investors Should Pursue FINRA Arbitration Claims

In light of the repeated findings that UBS misled investors, it is time for Lehman note investors to take action. If UBS recommended and sold you a Lehman Brothers structured product, including a "principal protection," "step-up callable," "return optimization," "partial protection," and "absolute return barrier" notes, you should contact a lawyer who represents investors in FINRA arbitration cases to discuss filing a FINRA arbitration claim against UBS. As part of that process, you would have to opt out of the class action that is pending against UBS. Doing so would allow you to proceed with your case immediately and not wait for the often lengthy class action process. Moreover, investors often recover a far greater percentage of their losses through an individual FINRA arbitration than through a class action.

Distributions from Lehman Bankruptcy Will Not Preclude a FINRA Arbitration Claim

Importantly, the Lehman Brothers bankruptcy is expected to result in the recovery of only about 20¢ on the dollar, leaving investors with the loss of 80% of their principal. Investors should know that receiving a payment from the Lehman bankruptcy will not prohibit you from pursuing a FINRA arbitration claim against the brokerage firms that sold the Lehman securities to you.

Dimond Kaplan & Rothstein, P.A. is an AV-Rated law firm that represents investors throughout the United States and Latin America in stockbroker misconduct and investment loss cases. The firm represents UBS customers who lost money in Lehman Brothers principal protection notes and other Lehman Brothers structured products. If you lost money in Lehman Brothers securities, please contact Jeffrey Kaplan, Esq. of Dimond Kaplan & Rothstein, P.A. at (888) 578-6255 or jkaplan@dkrpa.com for a free case evaluation. You also may visit the firm on the web at www.dkrpa.com or www.investmentfraud-lawyer.com.

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