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UBS Lined Its Pockets While Hanging Investors Out to Dry: Allegation

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Orlando, FLAmong a host of investors who were stung by alleged fraud thought to be associated with UBS Lehman Principal Protected Notes are retired individuals desperately trying to grow their nest egg through risk-free investments and a not-for-profit organization using the investment product to raise some much-needed capital with which to operate and undertake good works.

Not only was that capital not realized, but also the principal is gone—up in a puff of smoke in tandem with the spectacular collapse of Lehman Brothers Bank. Not-for-profits cannot afford to lose ground in their fundraising, let alone precious base capital. The same can be said for investors, many of whom lacking a dedicated pension fund and looking to their investments to fund their post-employment years.

According to the March 17 issue of GlobeNewswire, $500,000 in claims were filed with the Financial Industry Regulatory Authority (FINRA), with various plaintiffs seeking compensatory and punitive damages from UBS.

The allegation is that UBS marketed UBS Lehman structured notes as risk-free investments that placed none of an investor's principal in harm's way. Little wonder that investors trended to be retired or near-retirement. ''Investing 101'' states that younger investors with decades of investing ahead of them can afford to take risks, whereas investors nearing the end of their investment lives are prudent to seek risk-free products that place none of the principal at risk.

Not only did UBS put investor's principal at risk and commit UBS fraud by marketing UBS Principal Protected Notes as a product affording—as the name suggests—protection of an investor's principal, a further allegation suggests that UBS ignored serious warning signs of impending doom at Lehman Brothers.

It is further alleged that UBS took steps to aid in shoring up the troubled Lehman Brothers by extending non-collateralized loans from its own retail investor client base and reaping handsome dividends in the process, while continuing to promote UBS structured notes as risk-free.

Attorneys for the plaintiffs in many a UBS lawsuit claim that Lehman efforts, such as Lehman Repo 105 and Archstone Real Estate Investment Trust, were clear signs that Lehman was in serious trouble at the time. The failing bank's requirement of help from UBS itself was another clear indicator. And yet those warning signs were allegedly ignored. It is alleged that UBS benefitted from favorable loan terms in its direct dealings with Lehman Brothers, while continuing to market UBS investments that, in reality, offered little protection for investors.


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