The award in the case, Motamed v. UBS Financial Services, Inc., FINRA Case No. 09-02087, was issued in December by a three-person FINRA arbitration panel in Philadelphia. The case represents reportedly the seventh consecutive win by claimant investors in cases against UBS arising out of the so-called "Principal Protected" securities.
"Principal Protected" Notes, created by the now-defunct brokerage firm Lehman Brothers, are essentially financial instruments that combine derivatives with fixed income and/or equities, resulting in a product that was supposed to provide the safety of fixed income with the upside of the stock market. At least that is how these products were reportedly pitched to some investors by UBS. Not included in the sales pitch was that fact that Lehman Brothers itself was the sole guarantor of the so-called principal protection.
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These structured notes were reportedly marketed to conservative investors seeking preservation of capital, a reasonable yield and the potential for a modest gain in principal. In reality, these types of investments were being used by Lehman Brothers, and other brokerage firms, to help finance their near-term operational shortfalls. In fact, many clients were reportedly never even informed that these were Lehman Brothers products in the first place.
In some instances, it was not even apparent from customers' monthly statements that they owned a Lehman Brothers product, as the products were often listed simply as "LB 100% PPN." Now that Lehman Brothers is in bankruptcy, it appears that these supposedly "Principal Protected" Notes have little or no remaining value.