Wall Street Using Principal Protected Notes and Other Structured Products to Borrow Collateral-Free Billions From Main Street Investors

Naples, Florida — The Vernon Litigation Group law firm is warning retirees to beware of structured products, principal-protected notes, reverse convertible notes, and other structured products that Wall Street firms have increasingly dumped on conservative main street investors.

“The financial industry is effectively using structured products to borrow billions of dollars from Main Street investors with no collateral,” Chris Vernon is quoted as saying in the March issue of AARP magazine, the national publication for the retiree advocacy organization with more than 40 million members.

Chris Vernon and the Vernon Litigation Group law firm represent investors with more than $10 million in losses on Lehman principal-protected notes and other Lehman structured products sold by UBS.

Vernon Litigation Group represents two of the investors quoted in the AARP Magazine article that warns investors about the dangers of structured products. Charles Replogle, a 55-year-old restaurant owner from Vero Beach, Fla., was sold $130,000 in Lehman's “principal-protected notes” and other structured products that lost virtually all their value. Rob Brunhild, 49, of Bloomfield, Mich., also represented by Vernon Litigation Group, was investing for his family and 80-year-old mother. His family lost $275,000 on Lehman principal-protected notes and other structured products.

“Clearly, Wall Street is targeting fixed-income investors, most of whom are retirees seeking a steady source of income while guarding against any material loss of principal,” Vernon told AARP. The article notes that Vernon has represented hundreds of older investors who have been burned.

By “structuring” products, Wall Street gets paid to create a complex product via underwriting fees and then gets paid again to sell the product. Brokerage firms also use the complexity of these structured products to obscure the risk of loss of principal.

“A traditional bank wouldn’t make loans on these terms so why should retired investors take such a risk?” investor rights attorney Chris Vernon said. “Wall Street firms are borrowing from main street investors and asking retirees to loan them money with no collateral.”

The complexity, among other things, allowed UBS to dump Lehman principal-protected notes on investors even as Lehman Brothers was on the verge of insolvency in the summer of 2008.

Investors who bought these Lehman principal-protected notes were told just that — that their principal was protected. But when Lehman collapsed, these investors lost virtually all their principal.

According to Vernon, there is no shortage of financial information on any given strategy or product.  In fact, there is an overwhelming amount of information available to investors.

“What investors truly need today is independent and conflict-free advice from professionals qualified to analyze and interpret complex financial markets and complex financial products,” Vernon says.  “Brokerage firms are providing conflict-ridden recommendations along with a mountain of complex information in the form of a prospectus, which is the exact opposite of what investors need.”

Christopher Vernon, founder of the Vernon Litigation Group law firm, advocates for the rights of investors throughout the United States and abroad—both in and out of the courtroom and arbitration hearing room. Mr. Vernon currently holds an AV rating by Martindale-Hubbell, has been repeatedly recognized by his peers as a top securities attorney. Mr. Vernon has spoken at both national securities and national trial attorney conventions and has also conducted continuing education in the U.S. and abroad for securities regulators, CPAs, CFAs, CFPs, investment professionals, board-certified business litigation lawyers, and board-certified trust and estate lawyers.

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