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UBS ordered to pay $530,000 over Lehman notes

The Swiss bank's US brokerage arm sold $1 billion of Lehman-backed notes, with these sales continuing well into 2008. Lehman went bankrupt in September 2008.

DNA Web Team

Updated : Mar 17, 2018, 05:51 AM IST

UBS ordered to pay $530,000 over Lehman notes

A Wall Street arbitration panel ordered UBS to pay a retired couple $529,688 for selling them "structured notes" backed by Lehman Brothers that plunged in value when the investment bank collapsed in 2008.

A Financial Industry Regulatory Authority arbitration panel on Wednesday ruled that UBS must buy back the notes from the couple, Steven and Ellen Edelson.

Some of these Lehman notes were called "principal protected," a label that critics complain implied that investors could not lose money.

The Swiss bank's US brokerage arm sold $1 billion of Lehman-backed notes, with these sales continuing well into 2008. Lehman went bankrupt in September 2008.

FINRA arbitrators have ordered UBS to repay investors some or all of their losses in six of seven cases.

The Edelsons' attorney, Seth Lipner of Garden City, New York's Deutsch & Lipner, said the Edelsons bought about $3.5 million of structured products between 2006 and 2008, including $529,688 issued by Lehman.

Some of the Lehman securities were called "100% Principal Protection Notes" and others were called "Return Optimization Securities with Partial Protection."

Lipner, who estimates he has filed 25 to 30 of these protected note cases versus UBS, has prevailed in two previous cases. Lipner told Reuters this is the first arbitration award involving UBS and Lehman notes since April.

UBS officials say their sales of the Lehman notes followed all regulatory requirements, and that the losses were caused by the unexpected and "unprecedented" collapse of Lehman.
A structured note typically combines debt with a derivative contract. Investors can get slightly higher yields but, if the underlying derivative should fall, they have the assurance of getting their money back.

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