Securities Lawyers Blog

Mutual Fund Tortoise Energy Infrastructure (TYG) Investor Recovery Options

February 1, 2016 | by Staff Attorney

The investment attorneys with Gana Weinstein LLP continue to report on investor related losses in oil and gas and commodities related investments. Investors may have potential legal remedies due to unsuitable recommendations by their broker to invest in this speculative and volatile area. Our firm has been tracking a number of leveraged Master Limited Partnership (MLP) closed-end funds that have suffered significant losses. Among those funds is Tortoise Energy Infrastructure (NYSE:TYG) with $2.2B billion in assets. Over the past year the fund has suffered a 43% loss.

As a background, about 86% of the total MLP securities market, a $490 billion sector, can be attributed to energy and natural resource companies. In the past year, investors have lost $20 billion in publicly traded in master limited partnerships, publicly traded oil funds. This amounts to an astonishing $8 of every $10 they had invested, according to a report prepared for The Associated Press article. The research does not include losses from $37 billion of bonds sold by the partnerships in the five years since 2010 or losses from private placement partnerships. However, banks like Citigroup, Barclays, and Wells Fargo made an estimated $1.1 billion in fees for selling these products to investors.

Our clients tell us similar stories that their advisors hyped MLPs as high yielding investments without significant discussion of risk. In a recent Associated Press article, common stories of how investors are pitched by their financial advisors on oil and gas private placements were reported on. Often times these products are pitched as ways to ride the boom in U.S. oil and gas production and receive steady streams of income.

Investor Recovery Options for Swift Energy Co. Losses

February 1, 2016 | by Staff Attorney

The investment attorneys with Gana Weinstein LLP continue to report on investor related losses in oil and gas and commodities related investments. Investors may have potential legal remedies due to unsuitable recommendations by their broker to invest in this speculative and volatile area. Swift Energy Co., a U.S. shale driller, recently sought Chapter 11 bankruptcy protection. The Houston driller was founded in 1979 by Aubrey Earl Swift and had trimmed 60 percent of its capital budget, cut 20 percent of its workforce, and made other capital expenditure reductions in order to adjust to a 68% percent fall in oil prices over the past 19 months.

Swift Energy operates oil fields in the Eagle Ford Shale in South Texas and in Louisiana fields with listed assets of about $1 billion and with debts of $1.35 billion. The company’s revenues sank 55 percent from the same period last year and posted a $354.6 million net loss from July to September. In November lenders reduced the company’s borrowing base by $45 million.

Our firm continues to file complaints on behalf of investors who have been overconcentrated in oil and gas investments. Oil and gas and commodities related investments have been recommended by brokers under the assumption that commodities prices would continue to go up. Some experts are saying that if production volume continues to be as high as it currently is and demand growth weak that the return to $100 a barrel is years away.

FINRA Bars Broker Marat (a/k/a Matt) Zeltser

February 1, 2016 | by Staff Attorney

The securities lawyers of Gana Weinstein LLP are investigating customer complaints filed with The Financial Industry Regulatory Authority’s (FINRA) against broker Marat (a/k/a Matt) Zeltser (Zeltser). According to BrokerCheck records there are at least one customer complaint, one regulatory, one investigation, and one employment separation that have been filed against Zeltser. The customer complaints against Zeltser alleges a number of securities law violations including that the broker invested money in triple leveraged ETFs over long periods of time among other claims. The claim is currently pending.

FINRA terminated Zeltser after the broker failed to respond to a letter request for information in August 2015. Prior to that time, in January 2015, FINRA opened an investigation into Zeltser alleging potential willful violations of securities fraud laws and FINRA rules. Prior to that, Zeltser was discharged from Pointe Capital, Inc. for violating the firm’s advertising policy and the use of unapproved communications.

Brokers have a responsibility treat investors fairly which includes obligations such as making only suitable investments for the client. In order to make a suitable recommendation the broker must meet certain requirements. First, there must be reasonable basis for the recommendation the product or security based upon the broker’s investigation and due diligence into the investment’s properties including its benefits, risks, tax consequences, and other relevant factors. Second, the broker then must match the investment as being appropriate for the customer’s specific investment needs and objectives such as the client’s retirement status, long or short term goals, age, disability, income needs, or any other relevant factor.

Broker Spotlight: Customer Complaints Against National Securities Corporation Broker James Eichner

January 30, 2016 | by Staff Attorney

The securities lawyers of Gana Weinstein LLP are investigating customer complaints filed with The Financial Industry Regulatory Authority’s (FINRA) against broker James Eichner (Eichner). According to BrokerCheck records there are at least 3 customer complaints that have been filed against Eichner. The customer complaints against Eichner allege a number of securities law violations including that the broker was negligent, breached a fiduciary duty, and churning (excessive trading) among other claims. The most recent customer complaint against Eichner filed in June 2015 alleges that Eichner breached his fiduciary duty and was negligent in the handling of the customer’s account leading to $500,000 in damages. The claim is currently pending.

Brokers have a responsibility treat investors fairly which includes obligations such as making only suitable investments for the client. In order to make a suitable recommendation the broker must meet certain requirements. First, there must be reasonable basis for the recommendation the product or security based upon the broker’s investigation and due diligence into the investment’s properties including its benefits, risks, tax consequences, and other relevant factors. Second, the broker then must match the investment as being appropriate for the customer’s specific investment needs and objectives such as the client’s retirement status, long or short term goals, age, disability, income needs, or any other relevant factor.

The number of customer complaints against Eichner is high relative to his peers. According to InvestmentNews, only about 12% of financial advisors have any type of disclosure event on their records. Brokers must publicly disclose certain types of reportable events on their CRD including but not limited to customer complaints. In addition to disclosing client disputes brokers must divulge IRS tax liens, judgments, and criminal matters. However, FINRA’s records are not always complete according to a Wall Street Journal story that checked with 26 state regulators and found that at least 38,400 brokers had regulatory or financial red flags such as a personal bankruptcy that showed up in state records but not on BrokerCheck. More disturbing is the fact that 19,000 out of those 38,400 brokers had spotless BrokerCheck records.

Broker Spotlight: Customer Complaints Against Independent Financial Broker Brian Zimmerman

January 30, 2016 | by Staff Attorney

The securities lawyers of Gana Weinstein LLP are investigating customer complaints filed with The Financial Industry Regulatory Authority’s (FINRA) against broker Brian Zimmerman (Zimmerman). According to BrokerCheck records there are at least 5 customer complaints that have been filed against Zimmerman. The customer complaints against Zimmerman allege a number of securities law violations including that the broker made unsuitable investments, misrepresentations, failure to supervise, and churning (excessive trading) among other claims. The most recent customer complaint against Zimmerman filed in July 2014 alleges that Zimmerman breached his fiduciary duty, negligence, and misrepresentations in the handling of the customer’s account leading to $128,405 in damages. The claim is currently pending.

Brokers have a responsibility treat investors fairly which includes obligations such as making only suitable investments for the client. In order to make a suitable recommendation the broker must meet certain requirements. First, there must be reasonable basis for the recommendation the product or security based upon the broker’s investigation and due diligence into the investment’s properties including its benefits, risks, tax consequences, and other relevant factors. Second, the broker then must match the investment as being appropriate for the customer’s specific investment needs and objectives such as the client’s retirement status, long or short term goals, age, disability, income needs, or any other relevant factor.

The number of customer complaints against Zimmerman is high relative to his peers. According to InvestmentNews, only about 12% of financial advisors have any type of disclosure event on their records. Brokers must publicly disclose certain types of reportable events on their CRD including but not limited to customer complaints. In addition to disclosing client disputes brokers must divulge IRS tax liens, judgments, and criminal matters. However, FINRA’s records are not always complete according to a Wall Street Journal story that checked with 26 state regulators and found that at least 38,400 brokers had regulatory or financial red flags such as a personal bankruptcy that showed up in state records but not on BrokerCheck. More disturbing is the fact that 19,000 out of those 38,400 brokers had spotless BrokerCheck records.

Odebrecht Offshore Drilling Finance Investor Recovery Options

January 30, 2016 | by Staff Attorney

The investment attorneys at Gana Weinstein LLP continue to report on investor losses in oil and gas related investments. 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, master limited partnerships (MLPs), leveraged ETFs, mutual funds, and individual stocks.

According to Bloomberg, bonds of Odebrecht Oleo & Gas SA (Odebrecht), the oil services arm of Latin America’s largest construction conglomerate plunged to record lows after Petroleo Brasileiro SA, the corruption plagued stated owned oil company, canceled a contract to rent one of its drilling rigs. Odebrecht Offshore Drill Finance’s $1.5 billion of bonds come due in 2022 and are backed by cash flows coming from four drilling rigs. On the news back in September 2015, shares of the bonds fell 12% to about 26 cents on the dollar. Also $550 million in perpetual dollar bonds from Odebrecht Oil & Finance also declined.

More recently, Fitch Ratings has downgraded the senior secured notes issued by Odebrecht Offshore Drilling Finance Ltd. (OODFL) to ‘CCC’, and affirmed the senior secured notes issued by Odebrecht Drilling Norbe VIII/IX Ltd. at ‘B’.

Pharmaceutical Company Zafgen (ZFGN) Investors Suffer Massive Losses After Key Drug Placed on Hold

January 30, 2016 | by Staff Attorney

The investment fraud attorneys of Gana Weinstein LLP are investigating potential legal remedies due to recommendations to investors to buy speculative pharmaceutical company stocks. One such company is Zafgen, Inc. (Zafgen) (Stock Symbol: ZFGN). The stock was trading in the mid $40s just last September but now has plunged to under $6 a share, a staggering loss of shareholder value.

According to Bloomberg, Zafgen announced that its trial of an experimental drug to fight obesity was placed on hold by regulators after a second patient died taking the drug. The trial involves patients with a rare genetic disease called Prader-Willi syndrome that causes overeating. The trial was being studied to for the purposes of having the U.S. Food and Drug Administration approve the drug for those patients. Zafgen had finished one part of the trial that compared the drug to a placebo and then continued to a study where all patients took the drug. However, the FDA has now ordered a complete clinical hold on studies. The news sent the company’s shares down 61% when announced.

Before recommending investments in pharmaceutical 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. Pharmaceutical companies are notoriously risky investments. While investments in big name pharmaceuticals with diversified portfolios of established drugs and products offer greater stability some brokers recommend small bio-technology companies that have only one or two unproven drugs in clinical trials or development. The entire value of the company’s stock for these companies are often tied to the perceived success or failure of the drug. Even slightly downbeat news can send such stocks into a tailspin. However, brokers who recommend risky pharmaceutical companies are obligated to understand the risks of these investments and convey them to clients.

Broker Spotlight: Customer Complaints Against PHX Financial Broker Johnathan McHale

January 28, 2016 | by Staff Attorney

The securities lawyers of Gana Weinstein LLP are investigating customer complaints filed with The Financial Industry Regulatory Authority’s (FINRA) against broker Johnathan McHale (McHale). According to BrokerCheck records there are at least 6 customer complaints, one employment separation for cause, and 6 judgments or liens that have been filed against McHale. The most recent customer complaint against McHale filed in April 2014 alleges that McHale breached his fiduciary duty, negligence, and misrepresentations in the handling of the customer’s account leading to $108,000 in damages. The claim was settled for $14,995. In August 2012, another client alleged that McHale engaged in unsuitable investments leading to $43,000 in damages. The claim was denied.

In May 2014, National Securities Corporation terminated McHale alleging that he violated the firm’s policy by using his personal email address for business correspondence. In addition, McHale has 6 judgements. One tax lien filed in March 2011 for $34,598. Substantial judgements and liens on a broker’s record can reveal a financial incentive for the broker to recommend high commission products or services. A broker’s inability to handle their personal finances has also been found to be relevant in helping investors determine if they should allow the broker to handle their finances

Brokers have a responsibility treat investors fairly which includes obligations such as making only suitable investments for the client. In order to make a suitable recommendation the broker must meet certain requirements. First, there must be reasonable basis for the recommendation the product or security based upon the broker’s investigation and due diligence into the investment’s properties including its benefits, risks, tax consequences, and other relevant factors. Second, the broker then must match the investment as being appropriate for the customer’s specific investment needs and objectives such as the client’s retirement status, long or short term goals, age, disability, income needs, or any other relevant factor.

Commodities Company Freeport-McMoran (FCX) Investors Suffer Massive Losses

January 28, 2016 | by Staff Attorney

The law offices of Gana Weinstein LLP continue to report on investor related losses and potential legal remedies due to recommendations to investor in oil and gas and commodities related investments. Commodity prices have plummeted due to the economic slowdown in China and the strengthening dollar. Persistently low equity prices for companies in these sectors are ruining balance sheets prompting bankruptcies and debt reduction strategies that may be too little too late.

One such company is Freeport-McMoran (FCX). Analysts studying Freeport worry about lower projected copper prices, risks in Indonesia, and the company’s reluctance to sell assets to raise capital. According to analysts it may already be too late for Freeport. So far the company has taken some steps such as announcing suspending its dividend and reducing capital expenditures. However, the Arizona-based natural resources company has a $20 billion debt load and no meaningfully way to reduce it. Shares of Freeport which traded as high as $38 in 2014 now trade at $4.35 a share.

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. Oil and gas and commodities related investments have been recommended by brokers under the assumption that commodities prices would continue to go up. However, brokers who sell oil and gas and commodities products are obligated to understand the risks of these investments and convey them to clients.

Broker Investigation: 13 Customer Complaints Against Aegis Capital Broker Keith Connolly

January 27, 2016 | by Staff Attorney

The securities fraud lawyers of Gana Weinstein LLP are investigating customer complaints filed with The Financial Industry Regulatory Authority’s (FINRA) against broker Keith Connolly (Connolly). According to BrokerCheck records there are at least 13 customer complaints against Connolly. The customer complaints against Connolly allege a number of securities law violations including that the broker made unsuitable investments, misrepresentations, failure to supervise, unauthorized trading, and churning (excessive trading) among other claims. The most recent customer complaint filed in October 2014 alleged churning, negligence, unsuitability, overconcentration resulting in damages of $187,855 in damages. The claim is still pending. In August 2014, another client filed a complaint alleging administering the customer’s brokerage accounts claiming damages of 776,326. The claim was resolved settling for $450,000.

As a background, when brokers engage in excessive trading, sometimes referred to as churning, the broker will typical trade in and out of securities, sometimes even the same stock, many times over a short period of time. Often times the account will completely “turnover” every month with different securities. This type of investment trading activity in the client’s account serves no reasonable purpose for the investor and is engaged in only to profit the broker through the generation of commissions created by the trades. Churning is considered a species of securities fraud. The elements of the claim are excessive transactions of securities, broker control over the account, and intent to defraud the investor by obtaining unlawful commissions. A similar claim, excessive trading, under FINRA’s suitability rule involves just the first two elements. Certain commonly used measures and ratios used to determine churning help evaluate a churning claim. These ratios look at how frequently the account is turned over plus whether or not the expenses incurred in the account made it unreasonable that the investor could reasonably profit from the activity.

The number of customer complaints against Connolly is high relative to his peers. According to InvestmentNews, only about 12% of financial advisors have any type of disclosure event on their records. Brokers must publicly disclose certain types of reportable events on their CRD including but not limited to customer complaints. In addition to disclosing client disputes brokers must divulge IRS tax liens, judgments, and criminal matters. However, FINRA’s records are not always complete according to a Wall Street Journal story that checked with 26 state regulators and found that at least 38,400 brokers had regulatory or financial red flags such as a personal bankruptcy that showed up in state records but not on BrokerCheck. More disturbing is the fact that 19,000 out of those 38,400 brokers had spotless BrokerCheck records.