The European investor rights group Deminor is taking legal action on behalf of investors allegedly left out of pocket via products issued by Lehman Brothers, which has filed for bankruptcy amid the global financial crisis.

In a statement, Deminor said Netherlands-registered Lehman Brothers Treasury Co BV had issued bonds and structured products worth $34 billion in Europe which it said were "unconditionally and irrevocably" guaranteed by its US parent.

The bankruptcy of Lehman has sparked fears that structured products underwritten by the

US investment bank, for example, have lost all or most of their capital-protection value. The demise of Lehman has cast a shadow over the structured products industry.

“Following Lehman Brothers’ Holdings Inc financial troubles, both the parent company and its European subsidiary were granted protection against their creditors on 15 September and 19 September, respectively. As a result, many investors who had purchased these Lehman Brothers bonds and structured products are currently exposed to substantial losses on a pan-European scale,” Deminor said.

Lehman Brothers did not immediately return calls from WealthBriefing.

Deminor is taking legal action to recoup the losses. It said many of the financial instruments issued by Lehman Brothers were placed with retail investors through the networks of European retail banks.

“The Lehman Brothers financial instruments were repackaged as traditional savings or insurance products of the European retail banks and were not sold as corporate bonds with risk exposure to a highly leveraged American investment bank,” it said.

“In many cases, the European banks seem to have made misrepresentations about the risk profile and guarantees attached to these instruments when promoting them with their retail clients.  In various cases reported to Deminor, basic rules relating to risk spreading have not been observed.  Moreover, the banks have not kept their clients informed about the worsening risk profile of Lehman Brothers throughout 2007 and 2008.  European-wide MiFID rules seem to have been violated on a massive scale,” it said.