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Home > Cases > Lehman - Principal Protected Notes > Lehman - Principal Protected Notes Overview

Lehman Principal Protected Notes Under Fire

Brokerage firms - including Lehman Brothers, UBS, Citigroup and others - that marketed Lehman Principal Protected Notes as low-risk, conservative structured investment products are now finding themselves on the legal hot seat with investors. In Lehman's own marketing brochures, the structured notes were touted as having “100 percent principal protection.” As investors ultimately discovered, however, that promise turned out to be false, with the value of the notes now almost worthless.

Attorneys representing several investors who hold Lehman Principal Protected Notes say brokerage firms failed to disclose the fact that the structured notes were unsecured obligations of Lehman Brothers and tied to the credit risk of the company, which filed for bankruptcy on Sept. 15. In a brochure sent to investors just one month prior to Lehman's bankruptcy filing, the principal protected notes were referenced as providing buyers with “uncapped appreciation potential.” In a worst-case scenario, the brochure said investors would still receive their $1,000-per-note investment back in three years.

Numerous complaints from angry investors over the Lehman notes are now making their way to the offices of state regulators - so much so that the agencies may form a task force, as in the case of auction-rate securities, to investigate exactly how the notes were sold.

The Lehman Principal Protected Notes, also known as guaranteed linked notes, were considered structured investment products that combined fixed-income type investments with derivatives - and, unbeknownst to investors, considerable risk.

Since Lehman's Sept. 15 bankruptcy filing, holders of the notes have been forced to face the fact that the “100 percent principal protection” they were promised was a short-lived advertising gimmick. Now the truth is setting in, along with the reality that their Lehman Principal Protected Notes are worth pennies on the dollar.

Our affiliation of securities lawyers is actively involved in advising individual and institutional investors in evaluating their legal options when confronted with subprime and other mortgage-related investment losses.

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