The Lehman Brother bankruptcy filing on September 15 will have repercussions in many sectors of the financial markets. However, there is one sector that is not getting much press and that is the mom and pop individual investor. According to an article in the September 16, 2008 Wall Street Journal, Lehman marketed and sold vehicles called exchange-traded notes or ETNs. See also CNN.com article entitled “Demise of Lehman Shows Risk of Exchange Traded Notes.
These products were sold through other brokerage firms and trade similar to a stock. They were marketed as a way for investors to participate in the performance of various stock and comodity indexes. However, what may not have been adequately disclosed is the product is really just unsecured debt of Lehman. Not good.
According to Matt Hougan, editor of Index-Universe.com, a Web site that tracks index-based investments, Lehman has three ETNs in the marketplace with only about $13 million in assets to cover obligations far greater. Because they are unsecured debt, the holders will have to get in line with other creditors. Mr. Hougan believes the investors are looking to only get “pennies on the dollar.”
If you have purchase an Exchange Traded Note(s) from your broker, please contact us to discuss your options for recovering your losses.