Former Morgan Stanley Client Wins FINRA Arbitration for Unsuitable Investments in Oil and Gas MLPs
Posted on Saturday, December 9th, 2017 at 11:29 am
In November 2017, a former client of Morgan Stanley won an award in a FINRA arbitration for $50,000 in compensatory damages for alleged unsuitability with respect to equity investments oil and gas master-limited partnerships (MLPs) in an account from 2012 to 2016. The investors were clients of financial advisor Ronald W. Garrison Jr. (CRD# 3185768).
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.
The former Morgan Stanley client sought compensatory damages in the amount
of $1,007,949.51, disgorgement of advisory fees collected during the time period at issue from the fourth quarter of 2012, through the fourth quarter of 2015, in the total amount of $44,011.00; pre- and post-award interest at the legal rate on all compensatory damages; costs and expenses, including full reimbursement of filing and forum fees, and all other costs incurred in pursuing this arbitration proceeding including expert costs; attorneys’ fees; and such other and further relief as the panel deemed just and proper.
The causes of action included unsuitable recommendations/overconcentration; breach of fiduciary duty; negligent misrepresentation/omission; and failure to supervise/negligent supervision against Morgan Stanley. The causes of action relate to the former client’s investments in bonds, finance companies and oil and gas MLPs. The FINRA arbitration hearing was conducted in Orlando, Florida.
MLPs are limited partnerships that are publicly traded and combine the tax benefits of a limited partnership with the liquidity of publicly traded securities. MLPs are offered in two classes: limited partners and general partners. Limited partners are comprised of investors who purchase units in the MLP to provide the capital for the operation and receive income distributions from the MLP’s cash flow. On the other hand, general partners manage the day-to-day operation of the MLP and receive compensation based on the MLP’s performance. Many financial advisors recommended MLPs to elderly and retired investors seeking income during their retirement years and often represented these investments as bond alternatives. They were not. Regrettably, many investors have only learned the true risks associated with MLPs and MLP funds after they sustained massive losses.
Garrison has been registered with Morgan Stanley in Orlando, 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 Garrison’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.