Structured Notes Starting to Come Back After Lehman Brothers Debacle

Representing Investors Nationwide

In a recent Reuters article the author notes how structured notes are making a comeback and the major brokers are again pushing “principal protected” notes on the investing public. Until recently, investors had lost their appetite for the complex products after Lehman Brothers, the underlying credit on many of the issues, files for bankruptcy protection on September 15, 2008, wiping out billions of dollars in investment capital.

Craig McCann, director of Securities Litigation Consulting Group (SLCG), said the term “principal protected is pure marketing gloss.” Apparently effective marketing gloss as the major firms sold billions of dollars worth of these structured products to their unsuspecting retail client base, often using the term “principal protected” to make the sale. Unfortunately many of these notes were ultimately unsecured debt of the underlying issuer. This fact was often buried in the middle of the prospectus and not properly disclosed to the purchasers. When the credit markets collapsed in late 2007 and throughout 2008, many of these notes lose significant value and in the case of the ones backed by Lehman Brother, all of their value. Often the investors were not aware they had purchased Lehman debt until they received notice from their brokers regarding the Lehman Bankruptcy. By then it was too late.

The firms involved in the sale of these products include UBS, Morgan Stanley Smith Barney, and Charles Schwab. Allegedly, UBS issued over a billion dollars of Lehman backed structured products.

If you have lost money in a structured note investment, please contact our offices for a free case evaluation. Thank you.