A Financial Industry Regulatory Authority (FINRA) arbitration panel has ordered UBS to pay $432,000 to two UBS customers who purchased Lehman Brothers structured products from UBS. The securities became worthless after Lehman Brothers filed for bankruptcy protection in September 2008. The FINRA arbitration panel also ordered UBS to pay more than $50,000 in attorneys’ fees.
UBS sold approximately $1 billion in Lehman Brothers principal protected notes and structured products to U.S. investors. Those Lehman investors lost all of their money in the investments when Lehman Brothers went bankrupt. According to securities regulators and many lawyers who have filed FINRA arbitration claims and class action lawsuits, UBS misrepresented the risks associated with the Lehman Brothers structured products and failed to disclose certain material facts about UBS’s relationship with Lehman Brothers. UBS is accused of selling off or closing out hundreds of millions or billions of dollars of its own financial exposure to Lehman Brothers, while it was recommending and selling Lehman Brothers securities to its customers.
To date, FINRA arbitrators have ruled against UBS and in favor of UBS customers in all five FINRA arbitration cases that have been decided. In each case, the FINRA arbitrators have ordered UBS to pay UBS customers for Lehman Brothers investment losses that the customers suffered.
UBS has stated publicly that the arbitrators’ recent $432,000 award was based on the specific facts of the case. But there is nothing in the FINRA arbitration award that states or even implies that the award was based on the any unique facts of the case, rather than based on a finding that UBS as a whole had engaged in misconduct when it sold Lehman structured products to customers. UBS may have made such a public statement in an effort to dissuade other investors who lost money in Lehman principal protected notes from filing FINRA arbitration claims against UBS.