Erez Law continues to investigate former Morgan Stanley financial advisor Edward Barger (CRD# 1360282) regarding a reckless and unsuitable concentration in speculative energy sector investments (see previous post on Barger from February 2017 here). Barger was registered with Morgan Stanley in Miami, Florida from 2009 to November 2016. Barger is not currently registered with any brokerage firm.
Erez Law recently filed a FINRA arbitration claim on behalf of one of Barger’s former clients, a retired widow with irreplaceable retirement savings.
The Erez Law client turned to Barger to make low risk investments to preserve her principal and focus on safe income generation. She was risk averse, and she alleges that Barger assured her that the investments were financially sound. Barger’s former client alleges that Barger assured her that he had strict safety measures and controls in place to guard against losses.
Despite her risk aversion and inability to replace investment losses due to her advanced age, Barger recommended his client recklessly over concentrate her irreplaceable principal in speculative and unsuitable energy sector investments.
The retired Florida resident invested cash and a diversified common and preferred stocks of blue chip companies from a variety of market sectors. The client alleges that Barger recommended that she sell almost all of the blue chip stocks that she owned and instead invest in a portfolio that was dangerously over concentrated in high risk and unsuitable energy sector investments. The client alleges that Barger exposed her to an extreme sector risk and significantly increased the level of risk to which her irreplaceable retirement savings were exposed. Barger failed to recommend an adequately diversified and suitable portfolio for his client and failed to disclose the significant risk inherent to his unsuitable and reckless strategy. As such, Barger’s mismanagement and unsuitable recommendations caused the client to suffer devastating financial losses of $1 million.
It is alleged that Barger recommended that his customer invest in the following oil sector investments:
- Sandridge Energy
- Center Coast MLP & Infrastructure Fund
- Seadrill Ltd.
- Goldman Sachs MLP Energy Return Fund
- Kayne Anderson MLP
- OPI Steelpath MLP Income C
- Clearbridge American Energy MLP
- Cobalt International Energy
- Center Coast MLP Focus A
- Cushing MLP Total Return Fund
- CVR Refining
- Kayne Anderson Energy Total
Many 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.
Barger’s investment strategy of concentrating the vast majority of the client’s portfolio in high risk energy sector investments was reckless and grossly unsuitable, and it exposed the client to extreme sector concentration risk and significantly increased the level of risk which he irreplaceable retirement savings was exposed. Barger also failed to disclose the financial condition of the energy sector companies in which she invested and that they were declining rapidly, depriving the client of critical information.
Barger has been the subject of seven customer complaints between 2010 and 2017, two of which were denied, according to his CRD report:
- September 2017. “Claimant alleged, inter alia, unsuitability with respect to investments in accounts – January 2010 to November 2016.” The customer is seeking $400,000 in damages and the case is currently pending.
- June 2017. “Client verbally alleged, inter alia, unauthorized trading with respect to Equity investments.” The customer is seeking $18,000 in damages and the case is currently pending.
- May 2017. “Claimants alleged, inter alia, unsuitability with respect to investments in accounts- 2008 to 2013.” The customer is seeking $200,000 in damages and the case is currently pending.
- April 2016. “Claimants alleged, inter alia, unsuitability with respect to the investments in his account – August 2011 to December 2015.” The case is currently pending.
- May 2015. “Claimant alleged, inter alia, that investment recommendations were unsuitable-February 2011 through December 2014.” The customer sought $300,000 in damages and the case was settled for $70,000.
Additionally, he was some previous regulatory sanctions on his record. In January 1992, the Florida Division of Securities and Investor Protection issued a stipulation and consent agreement and final order in the matter of Edward l. Barger as an associated person of Robert Thomas Securities, Inc. regarding, “The terms of the agreement stipulate but are not limited to, the following: the department has agreed to permit Edward l. Barger to withdraw his application to be an associated (SP) person of Robert (SP) Thomas Securities, Inc., and Mr. Barger has withdrawn his application. The department has further agreed that it has withdrawn its notice of intent ab initio.”
In October 1988, the National Association of Securities Dealers, inc. sanctioned Barger to “Revocation/expulsion/denial.” And in April 1986, the Commodity Futures Trade Commission filed charges that Barger was involved in the fraudulent sale of off-exchange future contracts . The sanction details entailed,”(1) the CFTC rendered a decision that he not seek registration with the commission for a 3-year period; (2) he was fined $5,000.00; and (3) ordered to cease and desist.”
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, Morgan Stanley may be liable for investment or other losses suffered by Barger’s customers.
Erez Law represents investors in the United States for claims against former Morgan Stanley financial advisor Edward Barger, who is alleged to recommend a reckless and unsuitable concentration in speculative energy sector investments. 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.