ETN Arbitration

Serving Orlando, Florida and Taking Cases Nationwide

Since Lehman Brothers filed for bankruptcy on September 15, 2008 there has been a lot of press coverage, but not much about smaller individual investors. Lehman had sold many Exchange Traded Notes (ETN) through brokerage firms, marketed as opportunities for mom and pop investors to benefit from stock and commodity indexes.

Lehman Brothers ETNs

ETN creditworthiness is not rated separately, but is based on the issuer’s creditworthiness, in this case Lehman Brothers. It has since been discovered that these ETNs were basically unsecured Lehman debt, as Lehman had only roughly $13 million in assets – inadequate to cover their much larger obligations. Now those who bought the ETNs must line up with other creditors and are not likely to recoup their full outlay.

At Colling Gilbert Wright & Carter we are looking into options available to investors who have lost money in Lehman ETNs. Arbitrations have now expanded to this area and we have filed two arbitration cases with the Financial Industry Regulatory Authority. You can read more about this in an article referring to Colling Gilbert Wright & Carter.

Advantages of Arbitration

Arbitration is a desirable way to resolve issues surrounding the Lehman ETNs because each arbitration should reach resolution within 12 to 18 months. Lehman’s bankruptcy procedure is expected to last anywhere from five to ten years, which would delay investor recovery unacceptably.

Instead of a court format with jurors and a judge, an arbitrator evaluates the evidence and decides whether wrongdoing has occurred and how best to compensate the victims. The arbitrator’s decision is final and there can be no appeals (except in a Motion to Vacate under limited circumstances). Most brokers have their clients sign an agreement requiring any disputes to be settled through arbitration rather than by going to court.

UBS and other brokers are being investigated around the country for apparently misrepresenting the Lehman ETNs. UBS itself had about $300 million invested in Lehman and presumably knew that the bank was sliding, and this was a conflict of interest for UBS. UBS is denying any misrepresentation.

As of December, 2008 the Securities Investor Protection Corporation (SIPC) had mailed out 925,000 claim forms to Lehman’s customer’s and creditors. They are to be filed with James W. Giddens, the court-appointed trustee who is overseeing the Lehman Brothers liquidation.

If you have lost money because of the Lehman bankruptcy and feel that you might have been a victim of stock broker fraud, we can help. Please call or email our stock fraud attorneys for a free case evaluation. We serve the Orlando, Florida area but also take cases nationwide.