Naples, Fla. — UBS engaged in gross misconduct when it marketed and sold more than $125,000 in Lehman structured products to a Florida baby boomer couple nearing retirement after public warning signs about Lehman Brothers’ financial solvency had surfaced, according to a $700,000 claim filed today by the Vernon Healy law firm.
The couple, of Bonita Springs, Fla., has lost close to $700,000 out of their retirement accounts at UBS. Their UBS broker incompetently exposed the couple to unsuitable and preventable risks by, among other things, over concentrating two of their IRA accounts — constituting the bulk of their UBS retirement accounts — in stocks, the claim states.
In addition, a novice UBS broker urged the couple to purchase $125,000 in Lehman structured products called “return optimization notes” on March, 26, 2008 — after significant concerns about Lehman’s creditworthiness surfaced following the collapse of Bear Sterns that deepened Wall Street’s subprime credit crisis, according to the claim.
UBS sold the couple their Lehman structured products after Lehman’s first quarter 2008 earnings report raised concerns in the financial industry about its creditworthiness. As investment professionals, UBS was well aware, or should have been well aware, that Lehman’s credit risk was a significant concern when it sold the Lehman structured products, the claim asserts.
The UBS (UBS) sales pitch, emphasized the safety of Lehman Structured Products. However, the notes sold to the investors in this case, like so-called “principal protected” notes, were in fact risky, unsecured loans to Lehman Brothers, according to the claim.
Lehman Brothers’ bankruptcy in September 2008 left holders of structured notes standing at the back of the line with other unsecured creditors. They may recover little of their original investment.
Structured products, including principal protected notes and return optimization notes, were initially sold only to institutional investors. More recently, major brokerage firms, including UBS (UBS), Merrill Lynch (MER), Barclays (BCS) and Wachovia (WB), have pushed their sales forces to dump these products on their own retail customers, securities attorney Chris Vernon said.
“Essentially, UBS was selling Lehman structured notes so Lehman could obtain unsecured loans from the unwitting investing public — including UBS’ own retail clients — to support its faltering balance sheet and operations,” Vernon said. “While investors were told they were buying safe ‘notes,’ or ‘structured products,’ they were actually funding a failed Wall Street bailout attempt.”
As early as 2005, industry regulators from the Financial Industry Regulatory Authority (formerly known as the NASD) raised concerns about the way that Wall Street brokerage firms and banks were marketing complex structured products, including structured notes, to individual investors.
Vernon Healy is a Naples, Florida based law firm that is representing multiple Lehman structured product investors in FINRA arbitration.
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For more information, contact:
Christopher T. Vernon, attorney at law
Susan R. Healy, attorney at law
http://www.vernonhealy.com
http://www.protectinginvestors.com
(239) 649-5390
Toll Free: (877) 649-5394
email: acostanzo@vernonhealy.com
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