Articles Posted in Morgan Stanley

Chicago-based Stoltmann Law Offices has represented investors who’ve suffered losses from dealing with unscrupulous investment brokers selling exchange-traded products. Many of these high-risk products are unsuitable for retail investors.

With the COVID-19 crisis roiling financial markets, many investors have been sold products that rise when market indexes or individual securities fall. Many “exchange-linked products” (ETPs) often use borrowed money, or leverage, to magnify gains when the market drops, but they can also increase losses. They are generally only suitable for sophisticated investors and are linked to complex underlying futures contracts.

When the coronavirus crisis first made major headlines in the U.S. in early March, the stock, bond and commodities markets crashed. Since markets over-react to widespread greed and fear, traders went into mass selling mode over (later justified) expectations that demand for nearly everything from luxury goods to commodities would drop dramatically.

Chicago-based Stoltmann Law Offices has represented investors who’ve suffered losses from dealing with unscrupulous financial advisors selling municipal bonds and municipal bond funds

One of the most prominent trouble spots for investors have been mutual funds and single bonds issued by Puerto Rico, which was slammed by a long-standing debt crisis in recent years in addition to a devastating hurricane and breakdown of its infrastructure.  The island’s government, which issued the bonds, filed for bankruptcy, which triggered a negotiation with bondholders to negotiate its outstanding debt. That meant that bondholders will receive pennies on the dollar. A deal reached earlier this year slashed $8 billion in debts by 40%, according to Bloomberg News.

To date, the Puerto Rican collapse is the largest governmental bankruptcy in U.S. history, involving $129 billion in debts, reports The New York Times. The crisis was first noticed in 2012, when Moody’s downgraded the island’s bonds to near-junk status, which sunk prices of those debt securities. Since the bonds carried constitutional guarantees, investors were led to believe that they were secure. The bankruptcy was triggered since the island’s government was unable to pay back its debts. Investors, who were not fully informed of the fiscal debacle early on, got burned.

Chicago-based Stoltmann Law Offices has represented investors who’ve suffered losses from risky municipal bonds. One of the most troubling investments for investors has been bond mutual funds and single municipal bonds issued by Caribbean territories like Puerto Rico. The island was devastated by Hurricane Maria and a debt crisis. The island’s government, which issued billions in municipal bonds, filed for bankruptcy, which forced bondholders to take losses. Like Puerto Rico, the neighboring Virgin Islands may be facing a debt meltdown of its own.

The U.S. Virgin Islands, also severely damaged by two hurricanes in recent years, is also dealing with an ongoing debt crisis. With only about 100,000 inhabitants spanning three Caribbean Islands, the U.S. protectorate had been issuing high-yield municipal bonds in recent years to fund essential government services such as a power utility. The government owes more than $6.5 billion to creditors, which averages some $19,000 per resident. In addition, the islands have billions in unfunded pension and healthcare obligations. That’s one of the highest per-capita debt loads in the Western Hemisphere.

The debt explosion in the Virgin Islands has gone from bad to worse. Three years ago, credit ratings agencies slashed the ratings on government bonds to junk status. While that made the bonds’ yields more attractive (they rose), it also indicated a higher risk of default. As a result, prices on those issues dropped.

Stoltmann Law Offices has brought arbitration claims against dozens of brokerage firms like Ameriprise Financial, Merrill Lynch, Morgan Stanley, Wells Fargo, and JP Morgan Securities involving the unsuitable recommendations for investors to invest in oil and gas related securities.  In 2014 and 2015, we represented dozens of investors against various firms involving Master Limited Partnerships, or MLPs, which are almost always related to the oil and gas industry.  Then, during a big drop in the price of oil, a lot of oil and gas companies went into bankruptcy, dragging a lot of investor money with them.  History is repeating itself.

The price of oil has completely tanked in the last month. Even before the COVID-19 pandemic, the price of oil was being pressured by a price war involving Saudi Arabia, Russia, and OPEC.  Combined with the broad-based ongoing market crash, oil and gas investments – which are inextricably linked to the price of oil – have suffered catastrophic losses.  There are some well-know names on this list:

Goldman Sachs MLP and Energy Renaissance Fund – GER: Year to Date has dropped from 4.37 to 0.68 per share

Chicago-based investor rights attorneys at Stoltmann Law Offices, P.C. have been retained by an investor who lost substantial sums from her portfolio in 2018 and 2019 during an unprecedented bull market.  The investor’s complaint alleges that because her Chicago-based Morgan Stanley broker invested most of her retirement accounts in “bear” mutual funds, that she lost approximately $150,000 when her accounts should have actually increased by at least $100,000. The Morgan Stanley financial advisor apparently believed he had the ability to time the market and aggressively placed unsuitable bets on the market’s direction. It is alleged that Mr. George bet virtually all of this investor’s retirement money on the belief that the stock market would abruptly collapse in 2018 or 2019. Unfortunately for this investor, who is retired and has little investment experience to speak of, she missed out on the gains  she would have received had Morgan Stanley invested her funds in a well managed portfolio catered to her investment objectives and risk tolerance.

The specific funds that Morgan Stanley financial advisor Richard George is alleged to have recommended to this investor are:

  1. Leuthold Grizzly Short Fund (symbol GRZZX)
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