Articles Tagged with Unsuitability

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.

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.

Silver Law Group, The Law Firm of David R. Chase, and Ciklin, Lubitz & O’Connell have initiated an investigation in unsuitable recommendations and overconcentration in Arch Coal, Inc. (“Arch Coal”).

U.S.-based Arch Coal was the second-largest coal producer in the country as of 2015, with 128 million tons of coal sold in 2015.  Even with that lofty title, plunging oil and energy prices brought the company down.

The company, publicly traded on the New York Stock Exchange at one point but now traded on the OTC Markets, was a hot commodity in trading circles.

Our lawyers are investigating Wedbush Securities Inc. (“Wedbush”) (CRD# 877) broker William “Mark” Heiden (CRD# 2885156) for alleged unsuitable recommendations and overconcentration in various oil and gas investments.

Heiden, based out of Wedbush’s Newport Beach, California office, currently has four disclosures according to his FINRA BrokerCheck report.  According to the report, Heiden’s most recent disclosures are two FINRA arbitration filings, one filed in March 2016 and the other filed in October 2015.  Both are currently pending.

The 2015 FINRA arbitration alleges wrongful, intentional, fraudulent and deceptive activities, including unsuitable and unauthorized trading, falsifying documents, misrepresentation, and omission of material facts.  The FINRA arbitration alleges $1.5 million in damages.  In addition to those allegations, the 2016 FINRA arbitration alleges improper and unauthorized use of margin.  The 2016 FINRA arbitration alleges $200,000 in damages.

Silver Law Group, The Law Firm of David R. Chase, P.A., and Ciklin, Lubitz & O’Connell are continuing their investigation in the suitability of recommendations made by numerous financial advisors and brokerage firms to purchase risky oil and gas securities.

The price of oil has historically been volatile, risky, and difficult to predict. In turn, securities reliant on the commodity’s favorable pricing are highly risky and prone to huge swings in value depending on the price of oil. Such risky investments include but are not limited to:

• Master Limited Partnerships (MLPs)

Our lawyers have filed a FINRA arbitration claim against Raymond James on behalf of an aggrieved investor who lost thousands of dollars investing in risky oil and gas securities.

In order to handle the numerous claims of aggrieved investors who lost money in the risky oil and gas market, Silver Law Group has teamed up with attorneys at The Law Firm of David R. Chase, P.A. and Ciklin, Lubitz & O’Connell. The firms combined experience and resources will better-assist in producing the best possible outcomes for our clients.

Our client lost much of their investment after a Raymond James broker unsuitably recommended and overconcentrated our client’s funds in oil and gas securities.

Recent articles and reports reveal 90 companies with over $66.5 billion in total debt have defaulted on bonds issued to investors just like you. Some of these companies include well-known companies such as Linn Energy, Linn Co., Alpha Natural Resources, Arch Coal, Sandridge Energy and many others that were highly touted by large Wall Street firms just a few years ago.

In an article published earlier today in USA Today, there is a report that corporate bond defaults in the United States are expected to increase with a 30% jump predicted in bond defaults in the year to come.

Although this is not quite on par with the widespread losses incurred by investors in 2008-2009 during the financial crisis the investors who are experiencing these losses are no less impacted when it results in lost principal and it negatively impacts their financial security.

As most individual investors now understand, oil and gas securities, including common stock, bonds and master limited partnerships (MLPs), can be extremely volatile, high-risk and lead to substantial losses.  Over the last few years, certain financial advisors and stockbrokers, and the financial institutions for whom they worked, fell in love with oil and gas securities, particularly for their high-yield dividends in an otherwise low-to-no yield market environment.

As a result of this reckless infatuation by some trusted financial advisors, throes of conservative individual investors, many retired and elderly, sustained major financial losses in their nest-egg portfolios when the oil and gas markets nosedived.  Given their advanced age and life-stage, this class of elderly, conservative investors simply does not have the ability to replace these losses.  The effect has been devastating — ruined retirements, a down-size in quality of life, and a theft of a sense of financial security that took decades of hard work to achieve. Unfortunately, we are seeing this far too often these days.

The truth is that this should never have occurred in the first place.  Had financial advisors, and the securities brokerage firms obligated to supervise them, ensured that such conservative investors were never over-exposed to, or over-concentrated in, such unsuitable and inappropriate oil and gas investments, these life-changing losses would not have been realized.

A report published by the law firm Haynes and Boone on August 1, 2016 found that 90 gas and oil producers in the United States and Canada have filed bankruptcy from January 3, 2015 to August 1, 2016.  Over half of the bankruptcies have come in this year alone.

According to the report, the total debt defaulted on by the 90 companies is $66.5 billion.  Some of the more notable firms listed in the report are Linn Energy, LLC; Breitburn Operating LP; Sandridge Energy, Inc.; and Atlas Resource Partners, L.P., all of which have filed for bankruptcy in the last three months, many of which were heavily recommended by financial advisors and their respective institutions.

The numerous bankruptcies are the product of oil prices’ dramatic fall from the over-$100 per barrel heaven it occupied for some time.  While the prices of the commodity have always been volatile and difficult to determine, the prices have dramatically dropped.

Our lawyers are investigating oil and gas securities fraud claims against Wells Fargo broker John B. Leonard (CRD# 2113842).

According to Leonard’s Financial Industry Regulatory Authority (“FINRA”) BrokerCheck report, his 25 years in the securities industry has been relatively clean.  But in the past three months, two customers have filed FINRA arbitration complaints against him, alleging unsuitable recommendations in the oil and gas industry totaling close to $300,000.  The two complaints are currently pending.

While many brokers and brokerage firms have unsuitably recommended oil and gas securities, Wells Fargo has been accumulating many complaints recently.  Our firms have previously investigated Irvine, California Wells Fargo brokers Charles B. Lynch Jr. (CRD# 3004877) and Charles H. Frieda (CRD# 5502319).  The brokers have a combined 60 misconduct disclosures on their FINRA BrokerCheck reports, all but two coming in the last two years and a significant majority alleging unsuitable recommendations and overconcentration in the oil and gas industry.

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