Erez Law is currently investigating First Kentucky Securities Corp. financial advisors who recommended investment portfolios concentrated in the high risk energy sector.
Recently, a former Louisville, Kentucky-based First Kentucky Securities Corp. customer alleged that she suffered losses due to an unsuitable and overconcentrated investment strategy that her financial advisor recommended, which was concentrated in the high risk oil and gas securities. The customer and her 96-year-old mother were risk averse to maintain capital in her modest pension.
It is alleged that the investment advisor recommended a short-term transaction in a high risk mutual fund – Eventide Gilead. It is also alleged that the First Kentucky Securities Corp. broker recommended investments in the volatile energy sector, including:
- Linn Energy
- Breitburn Energy Partners, LLC
- Vanguard Natural Resources
Linn Energy, LLC was an oil and natural gas company headquartered in Houston, Texas. When global crude oil prices dropped, Linn Energy accrued significant debt. According to the company, Linn Energy, LLC filed a voluntary petition for restructuring under Chapter 11 of the Bankruptcy Code in May 2016 to alleviate itself of $6.06 billion in debt. In February 2017, LINN Energy, Inc. was formed as the reorganized successor to Linn Energy, LLC.
Breitburn Energy Partners experienced a decline in commodity prices beginning in 2014 and the company’s debt burden became unsustainable. Breitburn filed for Chapter 11 bankruptcy to restructure its balance sheet in May 2016 and eliminated $5.8 billion in debt, according to a statement on the company’s website.
The distribution value of Vanguard Natural kept steady in 2013 at $2.47 and then $2.52 in 2014, however it took a nosedive in 2015 dropping to just $1.24, according to the company website. In 2016, the value was at $.09 and as of March 2017 it currently sits at $.08. As of February 2017, Vanguard Natural Resources filed for relief under Chapter 11 of the U.S. Bankruptcy Code, and has entered into a restructuring agreement, according to a statement on their website.
These 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. 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.
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, First Kentucky Securities Corp. may be liable for investment or other losses suffered by its customers.
Erez Law represents investors in the United States for claims against First Kentucky Securities Corp. financial advisors, who are alleged to recommend investment portfolios concentrated in the high risk energy sector. If you were a client of First Kentucky Securities Corp. 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.