Erez Law is investigating Morgan Stanley for the recommendation and sale of high yield energy investments sold to retail investors. The Miami-based law firm believes that Morgan Stanley brokers sold high risk “junk” oil and gas bonds tied to the energy sector.
Despite these bonds being rated as “junk” at the time of recommendation and sale, it is believed that Morgan Stanley financial advisors company-wide sold these unsuitable bonds and over-concentrated investors’ portfolios with these high-risk securities.
A junk bond is a high-yield and high-risk security. Junk bonds have a speculative nature and a higher default risk and yield in relation to investment-grade bonds with a higher credit ranking. Junk bonds are risky investments that have a speculative appeal because of their high-yield nature.
Erez Law is investigating the sale of junk bonds by Morgan Stanley brokers issued by the following companies:
- Sandridge Energy, Inc. (filed for Chapter 11 bankruptcy)
- Swift Energy Co. (filed for Chapter 11 bankruptcy)
- Windstream Corporation
- SeaDrill Limited
- Citizens Communications Co.
- CenturyTel Inc.
- Cliffs Natural Resources, Inc.
- Peabody Energy Corp.
- Icahn Enterprises
- Chesapeake Energy Corp.
- Walter Investment Mgt. Corp.
- Sprint Nextel Corp.
- Seagate HDD Cayman
Sandridge Energy, Inc. and Swift Energy Co. both filed for Chapter 11 bankruptcy in October 2016 and April 2016, respectively. This is not a complete list of all junk bonds sold by Morgan Stanley brokers.
These and other energy companies were negatively impacted when global crude oil prices fell below $40 per barrel at the end of 2015, the lowest level since early 2009, as supply was in excess of global demand.
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 fiduciary 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.
Brokerage firms typically have compliance rules that deal specifically with the sale of junk bonds. These rules typically state that brokers are only to sell junk bonds to customers that are specifically understand the inherent risks of high risk, high yield “junk” bonds and are interested in aggressive or speculative investments.
Erez Law can help you recover losses you suffered as a result of unsuitable high yield energy investments. If you were a client of Morgan Stanley or any other brokerage firm and you have experienced investment losses or financial irregularities, please call us at 888-840-1571 or complete our contact form. Erez Law is a nationally recognized law firm representing individuals, trusts, corporations and institutions in claims against brokerage firms, banks and insurance companies.