Erez Law is currently investigating recommendations from brokerage firms across the country who recommended their clients invest in Seadrill Ltd., an offshore deepwater drilling contractor.
Seadrill 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 Seadrill. 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.
Seadrill was once valued at $23.7 billion but with the decline in oil prices, the company is now worth about $398 million with liabilities that exceed its current assets by nearly double. As of April 2017, Seadrill is on the brink of bankruptcy and in the process of a restructuring plan. As of June 2017, Seadrill trades on the New York Stock exchange for $0.45.
In late July 2017, the company announced that it reached an agreement with its bank group to extend the comprehensive restructuring plan negotiating period September 2017. Seadrill has also received consent from its lender to extend the maturity date of its $400 million credit facility from August to September 2017. According to the firm release, “The Company is in advanced discussions with certain third party and related party investors and its secured lenders on the terms of a comprehensive recapitalization, which remain subject to further negotiation, final due diligence, documentation and requisite approvals.” Despite this, Seadrill believes their restructuring plan will involve Chapter 11 bankruptcy proceedings, which the company says, “is likely that the comprehensive restructuring plan will require a substantial impairment or conversion of our bonds, as well as impairment and losses for other stakeholders, including shipyards. As a result, the Company currently expects that shareholders are likely to receive minimal recovery for their existing shares.”
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, brokerage firms across the country may be liable for investment or other losses suffered by its customers.
Erez Law represents investors in the United States for claims against financial advisors across the country, who recommended investments in Seadrill. If you were a client of Morgan Stanley 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.