UBS Financial Services is defending itself from claims that its sales of structured products involved unfair sales practices, inadequate supervision, and recommendation of unsuitable investments.
The claims involve the sale of structured products that were pitched as investment products that provide both the possibility of growth and principal protection. In other words, make money when the market rises but no losses when the market falls.
Securities firms sold $120 billion of these structured products in 2007. Over half of these sales were to individual investors.
Turns out that the "100% principal protection" with the UBS structured notes did not amount to much. Some of the UBS products that include notes of now bankrupt Lehman Brothers are currently worth about 9 cents per dollar invested.
UBS plans to vigorously defend itself against arbitration claims:
UBS will vigorously defend itself in the New Hampshire matter, and that it “properly sold Lehman structured products to UBS clients, following all regulatory requirements, well-established sales practices and client disclosure guidelines.”
UBS in its answer said its accuser is expecting “that UBS should have been clairvoyant and anticipated Lehman Brothers’ bankruptcy filing.”
So much for no downside or credit risk-caveat emptor and be sure to read your prospectus...
Source: Bloomberg
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