Is a UBS Fraud Arbitration Claim Better Than Class Action?

Washington, DCIt has been alleged that UBS Lehman Principal Protected Notes were little more than unsecured Lehman Brothers debt and are worthless in the wake of the failure of Lehman Brothers. Now, various lawsuits have been filed—including a class action—in an effort to recover damages.

Meanwhile there are those in the legal community who say that while a class action may recover some damages for an investor who litigates as part of a class action, an investor having suffered serious losses may be well advised to file an individual securities arbitration claim.

A January 5 release from Globe Newswire noted that the UBS Lehman structured notes were allegedly represented by UBS Financial Services to be a safe, risk-free investment. Investors were allegedly told that as a minimum, they would receive 100 percent of their investment back once the Lehman note reached maturity.

It was reported that UBS, serving as the largest vendor of the investment notes next to Lehman Brothers, failed to disclose the risks associated with the UBS Principle Protected Notes originating with Lehman Brothers, together with the fragile financial health of the latter company.

With the subsequent failure of Lehman Brothers, those notes are now completely worthless. Huge losses have been incurred by a host of investors who are now pursuing UBS fraud litigation.

While the class action involving UBS structured notes continues, UBS lost a decision this past December as the result of a securities arbitration claim brought before Financial Industry Regulatory Authority's (FINRA) Office of Dispute Resolution. In the matter of Motamed v. UBS Financial Services, et al., the FINRA Panel awarded the claimants full compensatory damages of $2.2 million, plus interest.

Legal experts have noted that such a substantial award would likely not be possible within a class action, from which a participant may recover only a nominal amount.

Investing for one's golden years is no longer a hobby for the wealthy. Given the reduction in traditional pension plans and a workforce more migratory than ever before, prudent investing has never been more important toward one's retirement—especially given the increased life expectancy of most people. To that end, prudent investments start with good information, which appears to have been lacking in this particular Lehman Brothers fraud allegation.

One wonders if investors would have participated as actively in the UBS investments, had they been apprised of the true nature of the products—and the inherent risks—from the outset.