Vernon Litigation Group: Finra Fine of Ubs for Lehman Notes Deception Is Woefully Weak

The investor advocacy law firm of Vernon Litigation Group, which represents Lehman principal-protected notes investors around the nation, called the $2.5 million fine issued against UBS today by Wall Street’s self-regulatory organization a disturbingly small amount.

FINRA, the Financial Industry Regulatory Authority, fined UBS $2.5 million and ordered that the brokerage firm pay $8.25 million in restitution to UBS clients who purchased Lehman principal-protected notes.

“I’m disturbed by the small size of the fine,” said Chris Vernon, who represents investor victims with more than $10 million in Lehman note losses. “FINRA, Wall Street’s self-regulatory organization, has handed one of its own a paltry fine for gross misconduct and deception of investors.”

Arbitration panels have repeatedly sided with investors against UBS in cases involving Lehman principal-protected notes and other Lehman structured products. Although FINRA’s action helps investors who are pursuing claims, it comes after considerable time has lapsed, Vernon said.

“How long does it take FINRA to act?” said Vernon, who began filings cases on behalf of investors against UBS involving Lehman principal-protected notes more than 2 years ago. More than a year ago, Vernon Litigation Group detailed malfeasance by UBS during the months leading up to the Lehman bankruptcy which is also the focus of the FINRA investigation.

UBS disregarded a series of red flags that warned of the looming Lehman collapse, such as the company’s Repo 105 transactions and its Archstone REIT deal that was a disaster for Lehman, according to claims filed by Vernon Litigation Group.

Investors who bought Lehman principal-protected notes were told just that — that their principal was protected. But when Lehman collapsed and filed bankruptcy in September 2008, these investors lost virtually all their principal, according to claims filed by Vernon Litigation Group.

FINRA’s restitution order does not prevent customers from either pursuing their pending arbitration claims against UBS or from filing new arbitration claims, according to Vernon Litigation Group.  What the agreement between FINRA and UBS does is to set the “floor” for claims filed by customers who purchased “100% principal protected” structured notes issued by Lehman Brothers during the relevant period and who meet the other criteria set forth by FINRA.

Those customers who pursue their claims in arbitration will recover at least the restitution amount in arbitration and may recover damages well in excess of that amount, depending on the facts of their individual cases and the findings of their arbitration panels, Vernon Litigation Group believes.

Vernon Litigation Group’s investigation reveals that the same supervision lapses, unsuitable sales, and misleading marketing and sales techniques that FINRA found also occurred in connection with many of UBS’s other structured product sales.

Written material obtained by Vernon Litigation Group as part of its investigation more than a year ago showed that UBS disseminated misleading product descriptions to its financial advisors that portrayed the Lehman notes as investments that put none of the investor’s principal at risk, according to multiple claims filed against UBS by Vernon Litigation Group.

These UBS-designed investment products supplied Lehman Brothers with an infusion of unsecured loans from main street investors as Lehman Brothers’ solvency became a concern, according to claims filed by Vernon Litigation Group. The Lehman Brothers bankruptcy in September 2008 left Lehman noteholders standing essentially at the back of the line as unsecured creditors.

When pitching these structured products after the March 2008 collapse of Bear Sterns and through the summer of 2008, UBS omitted to tell their own financial advisors and their clients that Lehman was on the brink of insolvency, according to claims filed by Vernon Litigation Group.

The Vernon Litigation Group law firm and its advocacy on behalf of Lehman note investors were recently featured in a March 2011 AARP Magazine article “The Time Bomb in Your Nest Egg” discussing the dangers of investing in structured products. The story told of a 55-year-old restaurant owner represented by Vernon Litigation Group who was sold $130,000 in Lehman “principal-protected notes” and other structured products that lost virtually all their value and also of a Michigan family represented by Vernon Litigation Group that lost $275,000 on Lehman notes and other structured products sold by UBS.

The securities attorneys at Vernon Litigation Group collectively have more than 30 years of experience representing investors who are victims of securities fraud and all manner of financial fraud and negligence.

For more information,

Contact Chris Vernon

Email: Tel: (239) 319-4434

Website: and

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