Master limited partnerships (MLPs) in oil and gas have been a highly recommended investment over the past few years. Many brokerage firms and financial advisors have advised clients to invest in these oil and gas energy stocks for the high yield or income potential. Touted to investors as secure, high quality income generating investments with only a moderate risk, these investments were anything but. Oil and gas MLPs are, in fact, risky and speculative because of their connection with oil prices. The massive slides in oil prices have caused these MLP investments to lose substantial value, which has resulted in substantial investment losses for many investors.
Brokerage firms and financial advisors should never have sold these risky investments to investors with conservative or moderate investment objectives. Unfortunately, these MLPs were often recommended to retirees and conservative investors who needed to protect their principal or earn income.
Every brokerage firm has the responsibility of “knowing the customer” and making a customer specific “suitability” determination for every investment recommendation. The “Suitability Rule,” FINRA Rule 2111, requires that a firm or associated person “have a reasonable basis to believe that a recommended transaction or investment strategy involving a security or securities is suitable for the customer, based on the information obtained through the reasonable diligence of the member or associated person to ascertain the customer’s investment profile.” Brokerage firms and their associated persons have the responsibility to make suitable recommendations with respect to individuals’ investment objectives, financial condition, age and other relevant factors.
Stockbrokers and other financial industry professionals have been known to engage in misconduct, such as making unsuitable investment recommendations, which violate industry rules and procedures. In order to protect investors, FINRA rules require brokerage firms to establish and implement a supervisory system. The implementation of the rules requires supervisors to monitor employees to ensure they comply with federal and state securities laws and securities industry rules and regulations, as well as the brokerage firm’s own policies and procedures. If broker-dealers do not establish and implement these protective measures, they may be held liable to investors for losses flowing from broker misconduct. As a result, investors who have suffered losses stemming from a broker or registered representative’s unsuitable oil and gas MLP recommendation can bring forth claims to recover damages against the brokerage firm which has a duty to supervise its employees in order to prevent misconduct and protect investors.
Have you suffered losses in your oil and gas MLP investment? Did your broker-dealer or stockbroker recommend these risky investments despite your conservative investment objectives? If so, call Robert Pearce at the Law Offices of Robert Wayne Pearce, P.A. for a free consultation. Mr. Pearce is accepting clients with valid claims against brokerage firms and their stockbrokers for unsuitable oil and gas master limited partnership recommendations, failure to do due diligence, and/or other misconduct.
The most important of investors’ rights is the right to be informed! This Investors’ Rights blog post is by the Law Offices of Robert Wayne Pearce, P.A., located in Boca Raton, Florida. For over 40 years, Attorney Pearce has tried, arbitrated, and mediated hundreds of disputes involving complex securities, commodities, and investment law issues. The lawyers at our law firm are devoted to protecting investors’ rights throughout the United States and internationally! Please post a comment, call (800) 732-2889, send Mr. Pearce an email at email@example.com, and/or visit our website at www.secatty.com for answers to any of your questions about this blog post and/or any related matter.