Securities Lawyers Blog
Long time readers of this blog know that we have previously reported that brokerage firms have increasingly recommended that retail investors invest heavily in various types of oil & gas investments including private placements, master limited partnerships (MLPs), leveraged ETFs, mutual funds, and even individual stocks. See Overconcentrated in Oil and Gas Investments?, MLP Fund MainStay Cushing Royalty Energy Hurt by Failing Oil & Gas Prices; Oil and Gas Investments – Issuers Profit While Investors Take All the Risk
For instance, MLPs are publicly traded partnerships where about 86% of approximately 130 MLP securities, a $490 billion sector, can be attributed to energy and natural resource companies. Billions more have been raised in the private placement market. These oil and gas private placements suffer from enormous risks that often outweigh any potential benefits including securities fraud, conflicts of interests, high transaction / sales costs, and investment risk.
These investments have been recommended by brokers under the assumption that oil & gas would continue to be sold at around $100 and increase steadily over time. However, last summer the price of oil & gas plummeted due to a strengthening dollar and increased global supply of oil and remains below $60 to this day. 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.