Saturday, May 22, 2010
100 percent principal protected absolute return barrier notes
Sounds like a good investment idea, doesn't it? And it was sold with the promise that worst case you get your principal back. Except when the issuing back goes tits up like Lehman Brothers.
The Minasians are a retired couple who live on Long Island. They contend that their UBS broker pushed the investment when one of their C.D.’s matured. The broker failed to explain the risks in the security, the Minasians said, and did not provide them with a prospectus. They did not even know their investment had been issued by Lehman Brothers until the firm collapsed.And another group of suckers were fleeced by another "pulled out of my ass" investment vehicle that no one understood but it sure paid good to the brokers. Makes you wonder if anybody on Wall St sold any sound products these last ten years.
“I am not a sophisticated investor,” said Mr. Minasian, a former engineer who is 68. “Many years ago I dabbled in the stock market, but I learned my lessons. Over the past 10 to 15 years my wife and I invested in C.D.’s.”
But that approach changed in January 2008, when, according to the Minasians, their UBS broker began calling with an investment idea — principal-protected notes. “We questioned him over and over,” Mr. Minasian said. “We initially told him we weren’t sure and that we wanted to think it over. Maybe the next day he called us and told us he was putting his father into the same notes and his father is very conservative.”
The Minasians said they decided to buy the instrument because they were assured by UBS, a financial adviser they had dealt with for years, that it was safe. The thing was called a “principal protected” note, after all.
Eight months later, Lehman went bankrupt. The note was virtually worthless.
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