Former Morgan Stanley Client Wins FINRA Arbitration for $100,000 for Energy Sector Losses

Posted on Monday, November 12th, 2018 at 2:36 pm    

In September 2018, a former client of Morgan Stanley settled a FINRA arbitration for $100,000 for losses sustained from high risk oil and gas investment losses. The investors were clients of financial advisor Gregory Buchko (CRD# 1410091).

The causes of action included negligence; breach of fiduciary duty; negligent supervision; breach of contract; and violation of Florida’s Securities and Investor Protection Act. The causes of action relate to Claimant’s investments in oil and gas companies, including, but not limited to: Breitburn Energy Partners, Cliffs Natural Resources, Linn Energy, Vanguard Natural Resources, Atlas Resources Partners, Ensco PLC, and Seadrill. The FINRA arbitration hearing was conducted in Boca Raton, Florida.

Over the past few years, oil prices have significantly declined. 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. The volatile energy sector experienced significant turmoil, and many energy companies were negatively impacted when global crude oil prices fell below $40 per barrel at the end of 2015. This was the lowest level since early 2009, as supply was in excess of global demand. Oil and gas companies experienced a spike in bankruptcies, which have left many investors reeling.

Breitburn Energy Partners is an independent oil and gas master limited partnership focused on the development and production of oil and gas properties throughout the United States. The decline in commodity prices beginning in 2014 placed stress on the industry as a whole, and the company’s debt burden became unsustainable. Breitburn has since filed for Chapter 11 of the U.S. Bankruptcy Code to restructure its balance sheet in May 2016 and eliminated $5.8 billion in debt.

Cleveland-Cliffs, Inc., formerly Cliffs Natural Resources, is a Cleveland, Ohio firm that specializes in the mining and beneficiation of iron ore. In December 2017, Cliffs Natural Resources (CLF) traded on the NYSE for $6.75, down from a high of $37.65 in February 2013. As of October 5, 2018, it trades for $12.28.

Linn Energy 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.

The distribution value of Vanguard Natural Resources 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.

Atlas Resource Partners, L.P. was an exploration and production company. Atlas Resources Partners filed for bankruptcy in July 2016 and executed a restructuring plan that it has said will cut debt by about $900 million, reduce interest expense by $80 million, and to alleviate itself of $1.36 billion in debt. Atlas Resource Partners emerged from bankruptcy protection in September 2016 protection with a new name, Titan Energy LLC.

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. 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. Despite these negotiations, Seadrill filed for bankruptcy in September 2017

Buchko has been registered with Morgan Stanley In Boca Raton, Florida since 2009.

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 Buchko’s customers.

Erez Law represents investors in the United States for claims against brokers and brokerage firms for wrongdoing. If 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.