Swiss banking major UBS has agreed to pay US$120 million to settle a lawsuit by investors in which the bank was accused of providing misleading information to its investors over the financial condition of Lehman Brother and its connection with the sale of structured notes.
The preliminary papers were filed and require court approval.
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Once the settlement goes through, it will resolve nearly US$900 million of Lehman securities UBS underwrote to clients and sold between March 2007 and September 2008, when Lehman filed for bankruptcy protection.
The lawsuit has alleged that UBS violated federal securities laws by selling structured products despite knowing that Lehman’s ability to meet these obligations was highly questionable because of its worsening financial condition.
The lawsuit also alleged that documents for "principal protection notes" offered by UBS were false and misleading because they did not disclose that "principal protection" depended upon the solvency of Lehman.
UBS spokeswoman Megan Stinson said: "The Swiss bank was pleased with the settlement, saying it avoided the cost and uncertainty of litigation, and had set aside reserves to cover it. The bank did not admit wrongdoing in agreeing to settle."
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By GlobalDataIn April 2011, UBS agreed with the Financial Industry Regulatory Authority to pay a US$2.5 million fine and up to US$8.25 million in restitution for misleading investors about Lehman’s principal protection notes.
