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FINRA issued an award in the arbitration between claimants Joseph R. Ritz, Susan F. Ritz and respondents Morgan Stanley Smith Barney LLC (#CRD 149777) and Charles Alan Correal (CRD# 1366202).

According to the award documentation, the claimants asserted claims for breach of fiduciary duty, violations of the Pennsylvania Unfair Trade Practices and Consumer Protection Law, suitability, professional negligence, breach of contract and breach of the duty of good faith and fair dealing, failure to supervise  and vicarious liability by Morgan Stanley Smith Barney and Charles Alan Correal.

The claimants allege that respondents invested their funds in risky and unsuitable energy stocks, including Seadrill, Ltd., Copano Energy LLC, and Interoil.

Our attorneys have reported in the past on the Haynes and Boone, LLP Oil Patch Bankruptcy Monitor (the “Bankruptcy Monitor”), a report that monitors the North American oil and gas company bankruptcies.  The Bankruptcy Monitor is updated periodically, with its most recent update coming in February 2017 and lists the total North American oil and gas companies that have filed bankruptcy at 114 since January 2015.

According to the Bankruptcy Monitor, the total amount of debt for the aggregate of the oil and gas companies’ bankruptcies is over $74 billion. Some of these companies were heavily recommended by Wall Street’s biggest investment banks such as Raymond James & Associates (CRD# 705), Citigroup Global Markets (CRD# 7059), Credit Suisse Securities (CRD# 816), Merrill Lynch (CRD# 7691), Wells Fargo Securities (CRD# 126292), and Morgan Stanley (CRD# 149777).

Notable oil and gas companies listed in the report that may have been recommended by the aforementioned firms are Linn Energy; Breitburn Energy; Sandridge Energy, Atlas Resource Partners, Swift Energy, and Memorial Production Partners.

According to PLS, Inc., a Houston-based oil and gas research firm, the oil and gas industry raised quite a bit of money in 2016 despite featuring almost 115 bankruptcies over the last two (2) years.

PLS compiled data reviewing the capital markets activity for 2016 according to a news release.  Some of the more notable figures included the $186 billion the oil and gas industry raised through U.S. public offerings across 346 bond and equity deals.  The $186 billion raised was actually $10 billion less than what was raised in 2015, according to PLS.

According to PLS, banks obtained an aggregate of $2.3 billion in fees on the money raised in 2016.  PLS also listed the top-10 banks for U.S. energy equity deals in 2016.  Among others, notable inclusions in that list were Morgan Stanley, Barclays, Credit Suisse, RBC Capital Markets, Citigroup, and Wells Fargo.

Our attorneys are investigating claims against Las Cruces, New Mexico-based Wells Fargo Clearing Services, LLC (CRD# 19616) broker Jeffrey (Jeff) R. Wilson (CRD# 1161819) over allegations that Wilson unsuitably recommended Wells Fargo customers to invest in oil, gas and energy investments.

Las Cruces, New Mexico Broker Jeff Wilson

According to Wilson’s FINRA BrokerCheck report, Jeff Wilson has three (3) disclosures, all of which feature aggrieved investors recovering some of their investment losses.

Peabody Energy (OTCPK: BTUUQ) announced on January 26, 2016 that the U.S. Bankruptcy Court for the Eastern District of Missouri approved the company’s reorganization plan, disclosure statement, private placement agreement and backstop agreement.

The bankruptcy court’s approval will allow Peabody to begin soliciting votes from its creditors on the proposed plan of reorganization ahead of March deadline and hearing to confirm the plan.

The bankruptcy court’s approval is another step closer to the final blow for shareholders, who, according to some analysts, probably will end up with cancelled shares and no equity in the reorganized Peabody Energy.  Shareholders have been fighting to get a piece of the reorganized company, even attempting to create an official committee to assist in crafting the reorganization plan.  The bankruptcy court judge denied that request earlier this month.

Our attorneys are investigating Bloomfield Hills, Michigan Centaurus Financial, Inc. (CRD# 30833) broker David B. White (CRD# 1382131) over numerous complaints alleging unsuitable recommendations in oil and gas investments such as non-traded REITs, oil and gas programs and limited partnerships.

According to White’s FINRA BrokerCheck report, White has eleven (11) disclosures.  Five (5) of the disclosures have come within the last five (5) years.

White’s most recent disclosure is a FINRA arbitration filed in June 2016 alleging unsuitable recommendations and damages in the amount of $75,000.  This complaint is currently pending.

Our attorneys are investigating investor losses in iPath S&P GSCI Crude Oil Total Return Index ETN (stock ticker “OIL”) and VelocityShares 3x Long Crude Oil ETN (stock ticker “UWTI”).

OIL is a complex exchange-traded note (“ETN”) designed to provide exposure to the S&P GSCI Crude Oil Total Return Index (the “Index”).  According to OIL’s issuer’s website, the ETN is riskier than ordinary unsecured debt securities and have no principal protection.  The investment, according to the website involves significant risk, and investors could potentially lose their principal.

OIL peaked at just over $25.00 per share in the middle of 2014.  Since that peak, it has dropped immensely in value.  It currently trades at or around $6.00 per share.  Barclays Capital is the issuer of OIL.

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.

The Financial Industry Regulatory Authority (“FINRA”) permanently barred former Moloney Securities Co., Inc. (CRD# 38535) broker John R. McKinstry (CRD# 1012658) after he failed to continue to provide information and documents regarding allegations against him that he unsuitably recommended oil and gas securities to his customers.

In total, McKinstry has 15 misconduct disclosures on his FINRA BrokerCheck report.  Nine of the 15 have come in the past year, and most of them are FINRA arbitration complaints alleging unsuitable recommendations in oil and gas securities.

In August 2015, McKinstry was discharged from Moloney after the firm conducted an internal review concerning customer complaints and a FINRA cause exam.

The Risks of Investing in Master Limited Partnerships in the Energy Industry on oilgasinvestmentfraudlawyer.com

Higher volatility and lack of transparency could make these unsuitable vehicles for many investors

If your broker or financial advisor has recommended that you invest in Master Limited Partnerships (MLPs) in the energy industry, consider your options carefully and conduct proper due diligence. MLPs are a potentially risky investment and aren’t suitable for many investors.

What is a Master Limited Partnership (MLP)?

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