Since 2014, the value of many oil-, gas- and energy-related securities significantly declined. Think back to the course of dealing you had with your financial advisor and the firm he or she works(ed) for, and recall how many times he or she may have told you to “stay the course,” “hold on,” “oil prices will recover,” or something similar. While that may have been some good advice for some investors, it’s not always as easy or simple as it seems.
The “Know Your Customer” Requirement
Financial advisors and their firms are required under the securities laws and regulations to “know their customers.” This does not simply mean to send you a birthday card, remember your spouse’s name, your golf handicap, or where you like to vacation. The securities industry rules and regulations require much more from your financial advisor and his/her firm. Consideration of your age, investment experience, financial situation, investment objectives, tax status, time horizon, and your individual risk tolerance are all required. All of this is important and for many they change over time based on various factors and changes in life circumstances, requiring changes in investment strategies.
Without specifically reviewing your individual circumstances and your ability to tolerate unnecessary risks in your investment portfolio, the recommendation to hold on, hang in there, stay the course, etc. from a financial advisor and their firm is little bit like hearing your medical professional tell you to have a bowl of chicken soup, rather than making an appointment to meet for you and giving you a detailed check-up, and perhaps considering some alternative treatment or even a prescription for something that might require more attention.
Just as with any trusted professional relationship, you are relying upon them, and the self-touted expertise of the firms that employ them, for their analysis and their consideration of your specific needs.
FINRA’s Suitability Rule
It appears the securities regulators recognized this as well, and in July 2012, the Financial Industry Regulatory Authority (“FINRA”) established a new Suitability Rule (Rule 2111). Pursuant to Rule 2111, a financial advisor may not simply repeat a mantra or read from a script. They must obtain and analyze enough customer information in order to have a reasonable basis to believe that a recommendation is suitable.
What’s more, many financial advisors are also SEC-registered investment advisors that owe an even higher legal duty to their clientele, a fiduciary duty to act in their customer’s best interest. So think back to those discussions (assuming they in fact occurred) about your oil, gas and energy investment holdings and whether your advisor told you to “hold” or just “hang in there” – consider for a moment what exactly was that advice based upon. Was it based on your specific needs and objectives, or was it simply a phrase being repeated to you from the firm’s party line?
Contact us if You’ve Suffered Oil and Gas Investment Losses
The Securities Arbitration and Investment Litigation Lawyers at the Silver Law Group, The Law Office of David Chase, LLC and Ciklin Lubitz & O’Connell (www.oilgasfinraarbitration.com) currently have and continue to investigate many brokerage and wealth management firms for their failures to adhere to the regulations and rules that apply to them in connection with the sale of securities linked to the oil, gas and energy sectors. Thus, these firms may face potential liability and monetary exposure.
If your broker or investment advisor and their firm advised you to invest in a security linked to the oil, gas or energy industry, and you have incurred substantial losses, please contact us at www.oilgasfinraarbitration.com for a no-cost case evaluation. Become informed about your rights, explore whether you have a claim and see if we can be of assistance in trying to recover your investment losses. Cases are taken on a contingency fee basis, meaning no attorney’s fee is owed if there is no recovery.
Our lawyers have collectively represented hundreds of investors in FINRA or securities arbitration claims and recovered millions of dollars from large and regional brokerage firms. For more information about the Law Firms, the lawyers, and the oil and gas investment practice area, please visit the oil and gas investor’s website at: www.oilgasfinraarbitration.com. You can also contact toll-free Mr. Silver at: (800) 975-4345 for a confidential, no-cost consultation to discuss your potential for recovery of your investment losses. Our attorneys represent clients nationwide in securities cases to recover investment losses. No fee unless we obtain a recovery for you.