A law firm has filed a securities 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.
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