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Stock Broker Arbitration Yields Award for Claimants

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Garden City, NYWhen it comes to stock broker arbitration, claimants may realize they can file a stock broker fraud claim against their broker, but they may not realize that an arbitration can be filed against financial firms, as well. Although stock broker arbitration is commonly linked to individual brokers, when financial firms have acted inappropriately by mismanaging accounts or by committing fraud, claimants can file an arbitration against the financial firm.

UBS AG has recently lost multiple FINRA (Financial Industry Regulatory Authority) arbitrations concerning Lehman Brothers "100 Percent Principal Protection Notes." In one recent arbitration, the panel ruled that UBS must buy back the notes at their original cost, totaling around $530,000. The claimants, a retired couple, claimed they purchased some of the Principal Protected Notes a month before Lehman Brothers failed.

In a different arbitration, UBS was ordered to pay investors $2.2 million to cover losses linked to the Principal Protected Notes. The arbitration award also included interest dating back to April 2008 and full arbitration fees.

Complaints about the Lehman notes include that the phrase "principal protected" misled clients about the risks associated with those notes. Those risks reportedly lost investors up to $1 billion when Lehman Brothers collapsed. Investors say they did not realize the notes were backed only by Lehman Brothers until the financial firm collapsed, at which point the notes became almost worthless. Furthermore, they allege the notes, which were risky, were marketed to conservative investors.

A spokesperson for UBS said their sales of the notes followed regulatory requirements.

UBS faces numerous arbitrations concerning its sale of the Lehman Brothers Principal Protected Notes.

Meanwhile, a retired woman was awarded approximately $140,000 in her arbitration against Smith Barney. The complainant alleged brokers invested much of her savings in General Motors stock without her consent. According to the complaint, more than 46 percent of the investors' holdings were placed in General Motors preferred stock.

According to an article in the Arizona Daily Star, the investor told her broker she had low risk tolerance but her money was still placed in the GM stock, despite it being ranked as higher-risk. Furthermore, the investor said she wanted out of the stock but was misled into believing the money was locked in.

Brokers have a duty to recommend investments that are suitable based on the client's tolerance for risk and investment goals. Failure to do so could result in clients filing an arbitration against the broker and the financial firm.


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