Erez Law is currently investigating recommendations from Merrill Lynch, Pierce, Fenner & Smith Inc. brokers who recommended sales of two oil and gas Master Limited Partnership investments: EV Energy Partners and Memorial Production Partners LP. The MLPs are limited partnership that is publicly traded, also known as a publicly traded partnership. It combines the tax benefits of a limited partnership with the liquidity of publicly traded securities.
EV Energy Partners and Memorial Production Partners LP and other oil and gas companies have experienced price fluctuations over the past few years, which has put financial stress on the oil and gas industry. A supply glut in 2014 and 2015 led to some of the lowest prices the market has seen in recent years. In turn, securities values also dropped, including the value of EV Energy Partners and Memorial Production Partners. While financial advisers can effectively coax clients into lucrative high risk, high yield investments in the oil and gas industry, some fail to fully inform their clients of the inherent risks.
EV Energy Partners focuses on generating long-term value through acquisition, operation and development of oil and gas properties. The value of EV Energy plunged in October 2016 after Stifel downgraded shares to hold from buy, cutting the price from $4 to $2. As of March 2017, the stock price currently sits at $1.56.
Memorial Production Partners LP focuses on the acquisition, production and development of oil and gas properties in the United States. In January 2017, company eliminated $1.3 billion in debt by filing for reorganization under Chapter 11 of the United States Bankruptcy Code, according to a release on their website. As of March 2017, the stock price currently sits at $0.12, down from $2.58 this time last year.
In one example of broker misconduct, a retiree has alleged that he had his retirement accounts and the majority of his assets with Merrill Lynch, was recommended to invest in these two MLPs, which were described as income-generating investments. These MLPs were volatile investments that risked the retired investor losing his entire principal, as well as incurring tax consequences, which is not suitable for a retired investor looking to maintain principal and generate income throughout retirement years. Merrill Lynch, nor the financial advisor, informed the client of the decline in the price of oil and gas and the potential for losses. This investor experienced significant losses in the amount of $1.6 million due to the decline in value in these two MLPs.
A broker must have reasonable grounds for each recommendation made to investors considering such factors as the customer’s other securities holdings, financial situation, and risk tolerance. In addition, before a firm offers a security to its customers, the firm must conduct due diligence, investigating the facts surrounding the security, to confirm that it is suitable for any customer of the firm. The suitability of an investment for a particular individual is at the center of the investment process and one of the key duties owed by a firm and its broker to the customer. A firm may be held liable for its failure to recommend suitable investments to its customers.
Pursuant to FINRA Rules, member firms are responsible for supervising a broker’s activities during the time the broker is registered with the firm. Therefore, Merrill Lynch, Pierce, Fenner & Smith Inc. may be liable for investment or other losses suffered by its customers.
Erez Law represents investors in the United States for claims against Merrill Lynch, Pierce, Fenner & Smith Inc. brokers who recommended sales of two oil and gas Master Limited Partnership investments: EV Energy Partners and Memorial Production Partners LP. If you were a client of Merrill Lynch, Pierce, Fenner & Smith Inc. or another firm, and have experienced investment losses, please call us at 888-840-1571 or complete our contact form for a free consultation. Erez Law is a nationally recognized law firm representing individuals, trusts, corporations and institutions in claims against brokerage firms, banks and insurance companies on a contingency fee basis.
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