Tan Kin Lian's Blog: Mis-selling of Lehman structured notes

Monday, November 03, 2008

Mis-selling of Lehman structured notes

http://www.bloomberg.com/apps/news?pid=20601109&sid=aBJ_0ULSgrjY&refer=home

Lehman Good-for-Retirement Notes Worth Pennies for UBS Clients
By Bradley Keoun and David Scheer

Nov. 3 (Bloomberg) -- UBS AG, Switzerland's largest bank, faces dozens of claims in the U.S. from clients who bought ``100 percent principal protected notes'' issued by Lehman Brothers Holdings Inc. that are now almost worthless.

Six attorneys hired to represent clients in the cases say UBS brokers touted the so-called structured notes as low-risk investments and failed to emphasize they were unsecured obligations of Lehman, which filed for bankruptcy in September. State regulators are fielding so many calls about Lehman's notes they're considering a task force to investigate the sales, said Rex Staples, general counsel for the North American Securities Administrators Association Inc., a group of 67 state and provincial regulators based in Washington.

``The sales pitches were that it's good for retirement accounts, and good for the safe, fixed-income part of people's portfolios as an alternative to owning stocks, because it's less risky,'' said Seth Lipner, a lawyer in Garden City, New York, hired by two holders of Lehman notes sold by UBS, including a 65- year-old accountant who says he lost $1.4 million in retirement savings. ``Of course, it turned out to be more risky.''

Any awards for investors would add to the financial industry's burgeoning costs for compensating individuals who bought supposedly safe investments that crumbled in the credit crunch.

Banks and securities firms, including Zurich-based UBS, Citigroup Inc. and Merrill Lynch & Co., already have had to swallow more than $3.6 billion in fines and market losses on auction-rate securities they had to buy back from clients under orders from the U.S. Securities and Exchange Commission and regulators in New York, Massachusetts and other states.

12 comments:

Anonymous said...: There is a very strong pattern of deception from the Wall Street investment banks.

After manufacturing their toxic and poisonous products, they attacked the 3 most "vulnerable" countries ( most competitive countries ) in Asia, keen to be THE financial hub.

In the process, they roped in the local banks.

Just Google " prosecution, fraud, etc" and the major investment banks and you can see US Law Enforcement Agencies like the FBI, SEC, US Attorneys, New York State Attorney General already successfully prosecuted these "investment banks" and more to come. More important, they are required to return EVERY cent to ALL the investors.

Only in the US, and, perhaps, HK ?; November 03, 2008 7:55 PM
Anonymous said...: Why is every government helping her people but not ours?; November 03, 2008 8:24 PM
Anonymous said...: They are!

They are helping YOU realise your mistake; November 03, 2008 9:01 PM
Unknown said...: who are they? and who are we? is it good SG and ppl who stays for more then 1,10,20,30,40,50 years here?; November 03, 2008 9:24 PM
Unknown said...: precisely.

"They are helping YOU realise your mistake"...

it is actually saying more than jus your investment mistake. Read between the line.; November 03, 2008 9:42 PM
Anonymous said...: I am a linguist residing in Germany and happen to be here on holiday. My attention was drawn to Mr Tan's blog courtesy of a friend at one of your country's universities. Perhaps I may be given the liberty of an opinion. Reading the various explanations, rationalizations and justifications given by the financial institutionsinvolved in the sale of minibonds and other structured instruments it seems to me that there is a case for linguistic investigation certainly of forensic language investigation. Let me explain: all the various comments and explanations that were use to sell the minibonds/structured instruments use almost the same phraseology, rhetorical gestures and to put it simply statements. This means that there are a shared assumptions and viewpoints in the sale of such products that indicate a highly reflexive intentionon the part of the sellers. Where similarities can be established we have then intentionsnd motivations that govern the marketing of these products. That establishes a set of motives and hence of responsibilities.; November 03, 2008 10:14 PM
Anonymous said...: Jeremy Warner: Lehman's: time to call in the Serious Fraud Office

Friday, 31 October 2008

Outlook Isn't it about time the Serious Fraud Office is called in over the collapse of Lehman Brothers? In the US, Federal investigators are crawling all over what is now unambiguously the worst financial crisis since the 1930s, yet in Britain, no criminal investigation of any aspect of the banking maelstrom has yet been announced. This is despite growing evidence of malfeasance in connection with the Lehman's insolvency in particular, but also more generally in the market-ing of some of the securities at the heart of the crisis. Where there is financial meltdown, there is nearly always fraud, so why isn't the SFO in there asking questions, collecting evidence and bringing prosecutions, as its US counterparts are in spades?

Britain has a notoriously more tolerant attitude to white-collar crime than the US, and this may be part of the explanation. The UK is less vigorous both at pursuing it and in prosecuting it. Yet it may also be partly down to the fact that here in Britain there were simply fewer rules to break. The regulatory regime applied to wholesale markets in London was not just "light touch", but almost wholly non-existent.

American investment banks came to London not for the restaurants, sky-high house prices, gloomy weather and appaling transport infrastructure, attractive though these attributes no doubt are, but because they could do things here that they couldn't back home. In Britain, it was possible to mix up client and proprietary interests in a manner that is not allowed in the US, where there are strict laws governing separation.

It is now conventional wisdom to argue that Hank Paulson, the US Treasury Secretary, made a huge mistake in allowing Lehman Brothers to go to the wall. The banking crisis became infinitely worse, it is argued, once it was realised that America couldn't be relied upon to rescue its banks. This led directly to the massive state bailouts seen around the world over the last month, and in Britain, the part- nationalisation of several banks.

Yet the truth of the matter is that the fallout from the Lehman's collapse was far more intense in London and Europe than it was in the US. In America, the impact has remained relatively contained and certainly no worse than Mr Paulson might have anticipated when he pulled the plug. Yet in Europe, it has had devastating consequences, with perhaps as much as $400bn of assets becoming frozen in the system.

This is because a very substantial part of Lehman's leverage was run through London, where there appear to have been virtually no constraints, either on the size of the liabilities racked up or in the way they were man-aged. How was it that the Financial Services Authority allowed the accumulation of liabilities on this scale with virtually no cash or capital in the Euro-pean bank to support them? At the end of each week, Lehman regularly swept the balance sheet clean and carted off any surplus cash back to New York. Lehman should not have been allowed to operate in London without its own liquidity pool, yet it was.

Worse, many clients have found that, unbeknown to them, their assets were being "rehypothicated" by Lehman for its own use for stock lending and other purposes. Many such clients find themselves as just ordinary creditors, eventually likely to receive no more than 30p in the pound. Why isn't the SFO trying to bring the perpetrators to justice? Perhaps it is because of the embarrassment it would cause regulators, who were not just asleep at the wheel, but perfectly tolerant of all this abuse.

As for Mr Paulson's decision – yes, it was a mistake, but only because he was perhaps ignorant of the state of anarchy that ruled in London.

See this link :

http://www.independent.co.uk/news/business/comment/jeremy-warner/jeremy-warner-lehmans-time-to-call-in-the-serious-fraud-office-980391.html; November 03, 2008 10:50 PM
Anonymous said...: I foresee a long battle/struggle to recover their money for those not considered "vulnerable" by FIs.
In the end they may get exhausted and accept whatever that comes. Just like the CLOB saga 10 years ago.; November 04, 2008 12:31 AM
Anonymous said...: Anonymous Anonymous said...

I foresee a long battle/struggle to recover their money for those not considered "vulnerable" by FIs.
In the end they may get exhausted and accept whatever that comes. Just like the CLOB saga 10 years ago.

12:31 AM

Thats fast learning.; November 04, 2008 3:22 AM
kilroy said...: Notice From the Securities Law Firm of Klayman & Toskes to All UBS Customers Who Purchased Lehman Brothers Structured Products and Notes

Last update: 10:41 a.m. EST Nov. 3, 2008
NEW YORK, Nov 3, 2008 (GlobeNewswire via COMTEX) -- The Securities Law Firm of Klayman & Toskes, P.A., www.nasd-law.com, announced today that it is investigating claims on behalf of investors who purchased Lehman Brothers structured products including Lehman Brothers Principal Protected Notes ("Lehman Principal Protected Notes") from UBS (UBS:UBS Ag
News, chart, profile, more
Last: 17.39+1.11+6.79%

4:02pm 11/04/2008

Delayed quote dataAdd to portfolio
Analyst
Create alertInsider
Discuss
Financials
Sponsored by:
UBS 17.39, +1.11, +6.8%) . Also referred to as guaranteed linked notes, Lehman Principal Protected Notes were "structured products" that combined fixed income investments with derivatives. What resulted was a product that supposedly provided the protection of fixed income, with the upside of the stock market.
UBS customers have complained that they were misled into believing that these Lehman Principal Protected Notes were safe and secure investments, and that their principal was fully protected. In reality, however, investors of Lehman Principal Protected Notes were subject to a significant amount of risk. Lehman was not investing the money received from the principal notes, but instead they were using it to fund their operations in the face of mounting losses stemming from the collapse of the subprime markets. Further, Lehman defaulted on many of these protected notes several months ago and they have not traded since. With the bankruptcy of Lehman Brothers, the protected notes are worthless.
The attorneys at the Law Firm of Klayman & Toskes are dedicated to aggressively pursuing claims on behalf of investors who have suffered significant losses. Klayman & Toskes, an experienced, qualified and nationally recognized securities litigation law firm, practices exclusively in the field of securities arbitration and litigation. It continues its representation of investors throughout the world in securities arbitration and litigation matters against major Wall Street brokerage firms.
If you wish to discuss this announcement or have information relevant to our investigation, please contact Steven D. Toskes, Esquire or Jahan K. Manasseh, Esquire of Klayman & Toskes, P.A., at 888-997-9956, or visit us on the web at http://www.nasd-law.com.
This news release was distributed by GlobeNewswire, www.globenewswire.com
SOURCE: Klayman & Toskes P.A.
Klayman & Toskes, P.A.
Steven D. Toskes, Esquire
Jahan K. Manasseh, Esquire
888-997-9956
http://www.nasd-law.com; November 05, 2008 10:41 AM
Unknown said...: Lehman Brothers Officers and Directors, UBS Sued
Over Principal Protection Notes

NEW YORK – The New York law firm of Zwerling, Schachter & Zwerling, LLP has filed a securities class-action lawsuit against UBS Financial Services, Inc., a subsidiary of Zurich, Switzerland-based UBS AG (NYSE:UBS), as well as officers and directors of Lehman Brothers, based on financial losses suffered by investors who bought securities known as principal protection notes.

Lehman Brothers issued the notes in question with UBS and Lehman serving as the underwriters and sellers. The lawsuit was filed in the U.S. District Court for the Southern District of New York.

Principal protection notes purportedly 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.

In this case, the plaintiff alleges that Lehman Brothers promised investors a complete return of principal even while the company knew its own financial situation was precarious. 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.

“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 attorney Jeffrey Zwerling, 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.”

The class action is brought on behalf of all persons and entities who, from May 30, 2006, until September 15, 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 May 30, 2006 (the “Registration Statement”) and Medium-Term Notes, Series I Prospectus Supplement, dated May 30, 2006 (the “MTN Prospectus”), and underwritten and sold by UBS and others, and who were damaged thereby (the “Class”).

If you are a member of the Class, or purchased the Principal Protection Notes, you may apply to serve as lead plaintiff. The lead plaintiff is responsible for overseeing the prosecution of the action and ensuring that the interests of the class are protected. You may apply to be appointed lead plaintiff through Zwerling, Schachter & Zwerling. The lead plaintiff deadline is January 5, 2009.

If you wish to discuss this securities class action or have any questions concerning your rights and interests with respect to this matter, please contact Zwerling, Schachter & Zwerling (Shaye J. Fuchs, Esq. or Willy T. Gonzalez) at 1-800-721-3900 or by e-mail at sfuchs@zsz.com or wgonzalez@zsz.com.

Zwerling, Schachter & Zwerling concentrates in prosecuting class actions nationwide on behalf of investors. The firm currently plays a leading role in numerous major securities and complex commercial litigations pending in federal and state courts and has offices in New York City, Garden City, N.Y. and Seattle, Wash. The firm has been recognized by courts throughout the country as highly experienced and skilled in complex litigation, particularly with respect to federal securities class-action litigation.

More information is available at http://www.zsz.com.

For more information on the securities class-action case involving UBS and Lehman Brothers, please contact Mark Annick at 800-559-4534 (office), 214-213-1754 (mobile) or mark@androvett.com; December 12, 2008 5:17 AM
Anonymous said...: The anonymous writer wrote in Nov 2008 is certainly correct when he calls for a linquistic investigation of how the scam is wrapped up by crafty use of words. This is also a fatally weak spot for the fraudsters as the means they deploy is evidence of intent - experts in this field do not write vaguely unless they are motivated by ulterior motives. Some corroborative efforts to expose these sorts of trickeries should be made in this area and the readers would are interested are advised to present their views also at the www.lbv.org.hk, the website of the Lehman Brothers Victims in Hong Kong.; July 29, 2009 10:01 AM

Monday, November 03, 2008

Mis-selling of Lehman structured notes

12 comments:

Blog Archive