UBS Financial Services, Inc., a subsidiary of Zurich, Switzerland-based UBS AG, along with directors and offices of Lehman Brothers encounter unpleasant time. The New York law firm of Zwerling, Schachter & Zwerling, LLP has filed a securities class-action lawsuit against them based on financial losses suffered by investors who bought securities known as principal protection notes. The lawsuit was filed in the U.S. District Court for the Southern District of New York.
UBS and Lehman served as the underwriters and sellers of principal protection notes designed to provide investors with protection for some or all of the principal they invest as well as a potential for a return based on the performance of the underlying investment. But note-holders’ investments effectively vanished in September when Lehman Brothers defaulted on the notes by filing the largest bankruptcy in U.S. history.
Lehman Brothers was maintaining inflated commercial and residential mortgage and real estate assets in addition to large amounts of leverage, and failed to take steps to lower its exposure to the weakening credit and mortgage markets or explain such risks to investors. According to plaintiffs Lehman Brothers promised investors a complete return of principal even while the company knew its own financial situation was precarious.
The class action is brought on behalf of all persons and entities who, from 30 May 2006, until15 September 2008 (the “Class Period”), purchased unsecured obligations known as 100% Principal Protection Notes (the “Principal Protection Notes”) that were issued pursuant to Lehman’s Form S-3 Registration Statement, dated 30 May 2006 (the “Registration Statement”) and Medium-Term Notes, Series I Prospectus Supplement, dated30 May 2006 (the “MTN Prospectus”), and underwritten and sold by UBS and others, and who were damaged thereby (the “Class”).The lead plaintiff deadline is 5 January 2009.
Lehman Brothers was selling these notes and telling investors they would get all of their principal back, but they knew that if something went wrong, they wouldn’t be able to hold up their end of the bargain,” says Jeffrey Zwerling, attorney who filed the lawsuit. “And the sad thing is these investors are not alone. There are others who bought notes from other investment banks and now are in the same situation.