Common Causes of Action

Securities litigation and arbitration have many different causes of action. It is not sufficient to just state the broker or brokerage firm committed misconduct. This is a brief overview of some of the potential claims you may have against your broker and/or brokerage firm that sold you risky oil and gas investments. Our attorneys have successfully litigated many cases and successfully argued these claims to help aggrieved investors recover their money and will rigorously represent you in your claims against bad-acting brokers and brokerage firms.

Unsuitable Recommendations

This claim involves an investor alleging a broker and/or the brokerage firm made improper investment recommendations. Among other basic tenets, brokers are required to recommend suitable investments to their customers. This requires that the broker:

  1. Investigates and conducts due diligence into the investment’s attributes including its benefits, risks, tax consequences, and other relevant factors to form a reasonable basis for the recommendation of the product; and

  2. Appropriately matches the investment with the customer’s specific investment needs and objectives, such as the customer’s retirement status, long or short-term goals, age, disability, income needs, or any other relevant factor.

Oil and gas investments tied to the volatile price of oil are considered high-risk. Oil and gas investment recommendations are often unsuitable when there is a transaction, the investor lost money, and the broker was aware of the client’s conservative profile and need for less risky investments.

Churning

This claim involves an investor alleging that his or her broker bought and sold securities with the sole purpose of generating fees, charges, and commissions without considering the buyer’s goals or objectives. In order to recover on the claims, the investor needs to establish:

  1. The broker controlled the account;
  2. The broker excessively traded the account given the investor’s objectives or with no investment objective in mind; and
  3. There was an intent to defraud or there was willful or reckless conduct by the broker.

Pertinent factors include how frequently the transactions occurred, the cost of those transactions, and whether the transactions were necessary to achieve the investor’s objective in light of the account’s value. Receiving many confirmation statements may be a cause for concern.

Misrepresentation or Omission

This claim involves an investor alleging the broker was intentionally misled or that a broker failed to disclose a material fact about an investment. A misrepresentation in the oil and gas context could be such that the broker intentionally told the investor his or her principal could never be at risk in certain oil and gas investments, such as master limited partnerships (MLPs) or other drilling partnerships.

Overconcentration

This claim involves an investor alleging his or her broker failed to diversify his or her investments, placing all the investor’s funds in one sector, industry, or specific security. It is a form of unsuitability. A broker should always diversify his or her customers’ assets to hedge against significant losses if any one of the investments fails.

Breach of Fiduciary Duty and Negligence

In many states, a firm or an individual stockbroker is a fiduciary to clients, meaning that investors are owed the highest duty of loyalty. However, state laws differ as to which types of actions may be considered a breach of fiduciary duty. Similarly, common-law negligence rules vary from state to state. With a negligence claim, an investor alleges that the broker’s advice or actions fell below a reasonable standard of care under specific circumstances. Such circumstances in the oil and gas context could include failing to understand the volatility of the oil market

Protect Your Rights by Enlisting an Oil and Gas FINRA Arbitration Attorney

Oil and gas investments can carry significant risks of monetary loss. Many brokers got caught up in the seemingly never-ending ascent of the price of gas and placed much of their clients hard-earned money in related investments and committing misconduct in the process. You may be able to bring any of these causes of action described above to FINRA arbitration. The oil and gas FINRA arbitration lawyers at Silver Law Group, The Law Firm of David R. Chase, P.A., and Ciklin, Lubitz & O’Connell have represented investors nationwide before FINRA and in both federal and state courts for securities violations. Contact us at (800) 975-4335 or through our online form to schedule a free consultation.

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