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Articles Posted in Oil and Gas Investments

The SEC and FINRA are finally stepping up to regulate nontraditional ETFs and ETNs and to ensure that these complicated products are not sold to unsophisticated investors.

Citigroup Global Markets Inc., Morgan Stanley, UBS Financial Services Inc. and Wells Fargo agreed to pay $9.1 million to settle allegations that they sold leveraged and inverse exchange-traded funds to clients who had no business investing in the complex instruments. Continue Reading

Elizabeth Ann Guarino of East Meadow, New York submitted a Letter of Acceptance, Waiver, and Consent (AWC) in which Guarino was fined and suspended by the Financial Industry Regulatory Authority (FINRA) for alleged unsuitable recommendations and unauthorized transactions in violation of FINRA Rules 2111 and 2010.

From May 2008 until November 2017, Elizabeth Ann Guarino was registered with Wells Fargo as a General Securities Representative. According to FINRA, Guarino recommended that an elderly customer invest $85,000 in oil and natural gas limited partnerships that were speculative securities transactions. The FINRA findings stated that the partnerships’ earnings were inadequate to cover fixed charges and proceeds raised from the preferred securities would be applied to reduce outstanding debt. As a result of declining oil and gas prices, the company filed for bankruptcy and the customer sustained loses of over $150,000. The firm compensated the customer for her losses and filed a Uniform Termination Notice for Securities Industry Registration (“Form U5”) terminating Guarino. Continue Reading

Tracy Rae Turner, a former broker with Colorado Financial Service Corporation, was barred by the Financial Industry Regulatory Authority (FINRA) amid findings that he offered and sold over $4.1 million in interests in saltwater disposal wells used in oil and gas production without the approval of his member firm.

FINRA found that Tracy Turner, of San Marcos, California, offered and sold interests in saltwater disposal well facilities (SWDs) to 12 investors, 8 of whom were Colorado Financial customers, without providing the firm with the required written notice of his participation in the securities transactions.  According to FINRA, Mr. Turner marketed the sale of the SWD interests by creating and making available online an Offering Memorandum which purportedly touted a “25.4% cash-on-cash return” on the investment.  FINRA found that Mr. Turner’s statements made unwarranted predictions about the returns investors could expect and were therefore misleading.  Mr. Turner was barred from association with any FINRA member in all capacities and fined $272,879.04 plus prejudgment interest.  The amount of the fine assessed is equal to the commissions Mr. Turner received from the sales of the SWD interests. Continue Reading

A FINRA hearing panel has expelled Red River Securities, LLC and barred its CEO, Brian Keith Hardwick, for fraudulent sales in five oil and gas offerings.  They have also been ordered to pay $24.6 million in restitution to investors.  According to FINRA, over the course of four years, Red River Securities and Brian Hardwick made misrepresentations and omissions in connection with the sales of interests in oil and gas joint ventures issued by Regal Energy, LLC, a close affiliate of Red River Securities.

FINRA found that Red River Securities and Brian Hardwick fraudulently misrepresented and omitted facts relating to the risky offerings.  For example, they allegedly misrepresented the amount of income distributed to investors, failed to disclose material facts regarding the risk involved, and omitted information about the fees involved.  The FINRA panel referred to this aforementioned misconduct as egregious and noted the “extent of the respondents’ monetary gain,” in which investors received total distributions less than $50,000 from the more than $25 million they invested in the offerings. Continue Reading

Joey Cless Broussard, of Princeton, Texas, was barred by the Department of Enforcement of the Financial Industry Regulatory Authority (FINRA) in a default decision made by FINRA’s Office of Hearing Officers for allegedly forging his customer’s signature on a false letter he created to cancel a request for rescission of a purchase of an investment in an oil and gas limited partnership.

FINRA alleged that while associated with Source Capital Group, Inc. of Allen, Texas, Mr. Broussard sold an interest in Bayou City Exploration, Inc. (Bayou City) oil and gas limited partnership to an elderly customer.  The investment gave investors a right of rescission if they requested it in writing within ten days of purchase.  The customer sent a rescission letter to Bayou City to cancel her investment.  Upon learning this, FINRA alleged that Mr. Broussard contacted the customer to get her to keep the investment, explaining that she needed to send a second letter to Bayou City to cancel her rescission request.  The customer did not send the letter.  Instead, FINRA alleged that Mr. Broussard handwrote a letter purportedly from the customer to cancel the rescission request, forged her signature, and faxed the letter to Bayou City.  Joey Broussard did not have the customer’s permission to write the letter or forge her signature.  As a result of the default decision, Mr. Broussard was barred from association with any FINRA member in any capacity.  Continue Reading

Carl Busch, a Registered Principal with the Dallas, Texas based WFG Investments, Inc. (WFG) submitted a Letter of Acceptance, Waiver and Consent (AWC) in which he was fined and suspended by the Financial Industry Regulatory Authority (FINRA) for failing to adequately supervise the unsuitable IRA recommendations and transactions of a registered representative under his supervision.

According to FINRA, Carl Wayne Busch, of Oklahoma City, Oklahoma, failed to adequately supervise or properly investigate numerous red flags in connection with a registered representative of his member firm who recommended and engaged in unsuitable trades in the Individual Retirement Account (IRA) of a retiree with known health problems, limited income, and a “moderate” risk tolerance. Continue Reading

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. Continue Reading

The U.S. Commodity Futures Trading Commission (CFTC) has issued an Order against Arya Motazedi, of Miami Florida, for engaging in fraudulent gas and crude oil futures transactions. According to the Order, Mr. Motazedi prearranged nearly 34 trades between his former employer’s account and his personal accounts at prices which disadvantaged his former employer’s account. In a practice known as “front running,” Mr. Motazedi allegedly placed orders for his personal accounts ahead of orders he placed for his former employer’s account on at least 12 occasions. The Order states that Mr. Motazedi’s trading activity caused his former employer trading losses of $216,955.80.

The CFTC Order further states that Mr. Motazedi was able to accomplish his fraud by misappropriating non-public, confidential, and material information despite the employer’s internal policies prohibiting such practices and his duty to confidentiality given his relationship with his employer. Moreover, the Order states that Mr. Motazedi breached his duties to his employer by failing to disclose the trading. The CFTC’s Order requires Mr. Motazedi to pay a monetary penalty of $100,000 and restitution of $216,955.80. Additionally, the Order permanently bans Mr. Motazedi from trading and registering as a futures professional in any capacity with the CFTC. Continue Reading

Dalas L. Gundersen, a former Registered Representative with the Willows, California branch of Edward Jones, submitted a letter of acceptance, waiver, and consent in which he consented to, but did not admit to or deny, the Financial Industry Regulatory Authority’s (FINRA) sanction and findings that he made unsuitable investment recommendations to his customers in light of their financial goals.

FINRA’s findings alleged that Dalas Gundersen, of Arbuckle California, recommended that a married couple invest in an intermediate municipal bond mutual fund, even though the investor couple had inquired about investing in oil and gas master limited partnerships. According to FINRA, the couple acted upon Mr. Gundersen’s recommendation and purchased nearly $1.26 million in mutual fund, which represented 80% of their net worth. Continue Reading

Brian Lewis Pittman, a former broker employed by Naples, Florida-based Westport Resources Investment Services, Inc. (Westport Resources), submitted a Letter of Acceptance, Waiver and Consent in which he consented to, but did not admit to or deny, the described sanctions and the entry of the Financial Industry Regulatory Authority’s (FINRA) findings that he participated in private securities transactions without giving the required written notice and without the approval of Westport Resources.

FINRA found that Brian Pittman referred two Westport Resources account holders to invest in an oil and gas limited partnership interest in the Permian Advanced Oil Recovery Investment Fund I, LP, offered by Quest Energy Management Group, Inc. The two Westport customers, according to FINRA, invested $375,000 in the Permian offering and Mr. Pittman received approximately $45,000 from Quest in compensation, which he ultimately ended up returning when he was told to do so. Continue Reading

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