The liquidation of a $113 million fund like MLPL under these circumstances is shocking. The notes were supposed to expire by the earliest in 2040. However, the rapid fall of the price of oil triggered an acceleration provision. Investors recommended to hold such funds by their advisors were probably not aware that the funds could be required to automatically liquidate their holdings under duress and at firesale prices that will erase shareholder value. The liquidation provisions in the ETNs is a risk that financial advisors may not be aware of when they recommend buying and holding this speculative asset class that offers leveraged exposure to a volatile commodity like oil. Further, at this point it would take a mathematician to figure out what an investor is likely to receive in repayment.
Our firm is investigating potential securities claims against brokerage firms over sales practices related to the recommendations of oil & gas and commodities products such as exchange traded notes (ETNs), structured notes, private placements, leveraged ETFs, mutual funds, and individual stocks. Our firm has written numerous articles concerning the dangers of MLP investments. MLPs are publicly traded partnerships. About 86% of the total MLP securities market, a $490 billion sector, can be attributed to energy and natural resource companies. However, most of these companies are heavily reliant on high oil prices to sustain their business models.
Before recommending investments in oil and gas and commodities related investments, brokers and advisors must ensure that the investment is appropriate for the investor and conduct due diligence on the company in order to understand the risks and prospects of the company. Many of these companies relied upon high energy prices in order to sustain their operations. As reported by the Wall Street Journal the drop in oil and energy prices and the industry downturn has made it difficult for many companies to refinance their debts.
Brokers who sell oil and gas and commodities products are obligated to understand the risks of these investments and convey them to clients. Investors who have suffered losses may be able recover their losses through securities arbitration. Our consultations are free of charge and the firm is only compensated if you recover.