Skip to main content

UBS Held Liable In Lehman PPN FINRA Arbitration

According to the WSJ today:

In what will likely be a closely studied ruling, a retail investor was awarded $200,000 after a Financial Industry Regulation Authority arbitration panel decided the investor’s UBS AG (UBS) broker inappropriately sold her risky Lehman Brothers principal protected notes.

The case is one of the first involving the Lehman notes to be heard by a Finra arbitration panel. While the arbitration ruling won’t set a precedent, it could be an indicator of how future rulings on similar cases will play out.

There are “many pending similar cases,” said Jacob Zamansky, of Zamansky & Associates, who represented the investor in the arbitration case. Zamansky stated he is representing a dozen clients in a similar situations around the country.

As in most arbitration awards, the three-person arbitration panel didn’t give reasons for its findings. Other panels that hear similar cases don’t have to follow precedent so they could rule in different ways on nearly identical cases. Still, the case will likely be cited by other plaintiff lawyers.

The case, submitted for arbitration a year ago, was brought against UBS Financial Services, a unit of UBS, which is also being investigated by numerous regulators for alleged issues around its selling of these notes. Zamansky’s client was seeking $300,000 in compensatory damages because the broker recommended structured products. Zamansky argued that the notes were “speculative derivative securities” and were “unsuitable” for unsophisticated investors, according to the Finra claim statement.

The broker purchased two notes for his client: a $225,000 guaranteed principal protection note and a $75,000 return optimization note. The panel ruled that the client should be compensated $150,000 plus interest and attorney fees on the principal protected note; there was no compensation for the $75,000 note.

UBS said in a statement it “is disappointed the arbitration panel in this case awarded the claimant any damages, even if it was the only half the compensatory losses she was seeking. UBS maintains that any client losses were the direct result of the unexpected and unprecedented failure of Lehman Brothers, which affected all Lehman bondholders.”