FINRA Expects Wave of Arbitration Claims Thanks to Bad Energy Investments

The Financial Industry Regulatory Authority (FINRA) is expecting a massive wave of arbitration claims against brokers and their brokerage firms in the coming months, thanks to bad energy investments. Because of the huge drop in oil prices, many of the cases being discovered are ones in which an adviser put too much of a client’s money into energy investments that turned out to be basically worthless as U.S. oil prices collapsed. Many of the customers are elderly and too much of their portfolios were put into risky oil and gas investments. And adviser must take into account if the investment is suitable for the client or not, and age, net worth, investment objectives and risk tolerance play large factors in determining this. Many advisers put much of their client’s money into oil and gas and energy investments, because the commissions were high. Now, with oil prices tumbling, it is a very bad situation for those whose portfolio was concentrated in the resources. High-yield default rates in the energy sector are expected to spike to 20% this year from about 7% at the end of 2015, and less than 1% in December 2014, according to Fitch ratings. The trailing 12 month default rate among exploration and production companies will jump even higher by the end of 2016, to between 30% and 35%, also Fitch estimates.

Another issue investors could see is that many do not become aware of the extent of their losses until they receive their year-end statements from their broker, or around the month of April. This could very well solidify the fact that analysts are predicting many more arbitration claims in the coming month and months ahead. Some client’s money was concentrated almost exclusively in oil and gas investments and these individuals are expecting to be hit especially hard. Some of the investments include: Linn Energy, AmeriGas Partners and British Petroleum, among others. Linn Energy, in a filing with the Securities and Exchange Commission (SEC) on Tuesday stated that a Chapter 11 bankruptcy filing may be “unavoidable.” This means serious trouble for investors. Call us today if you have experienced losses with Linn Energy or other oil and gas or energy investments. We may be able to help you bring a claim against your brokerage firm to recover your money.