Chicago-based Stoltmann Law Offices continues to represent investors who’ve suffered losses in connection with financial advisors who have oversold energy stocks and other energy-related investments. With the COVID-19 pandemic depressing demand for everything from gasoline to jet fuel, it’s been a mostly rotten year for energy stocks. In fact, when news first hit the markets in early March, stocks in many oil & gas companies and funds that invested in them crashed. At one time, the Energy Select SPDR (XLE), an exchange-traded fund that invests in energy companies, was down as much as 58%.
The net effect of tens of millions of Americans sheltering in place, avoiding travel and not commuting slashed demand for fuels. Only a handful of people were getting on jets, buses, ships, trains, or driving to work. That resulted in energy companies eliminating dividends and losing money. While the economy has recovered somewhat as more states have re-opened in recent months, energy demand is nowhere near where it was at the beginning of 2020. The U.S. economy is now in a recession, which may continue into 2021.
What is important to realize about oil/gas prices is, the decline in energy demand actually began a few years ago – primary energy consumption dropped by half in 2019 alone — hasn’t stopped brokers from selling investments in oil & gas companies. They have sold stocks, limited partnerships, and mutual funds that concentrate in fossil fuels, which are volatile commodities and have a long history or volatility.
As with any over-promoted investment, brokers had pitched high dividends and rates of return to investors as justification for their solicitations. When those promises didn’t materialize and the vehicles lost money, investors were left holding the bag. FINRA, the securities industry regulator, for example, recently fined Wells Fargo Advisors more than $550,000 in connection with two Irvine, California-based Wells brokers who sold energy stocks to 70 customers, who collectively lost more than $20 million in 2014 and 2015.
The Wells brokers were later fired by the bank and barred from the securities industry. “The firm failed to investigate trading across customer accounts managed by brokers Charles Frieda and Charles B. Lynch once 28 red flags were raised about overconcentration in the accounts of four customers in a single, low-priced energy stock (ranging from 35.2% to 87.0%),” according to a consent letter signed recently by Wells Fargo Advisors CEO Jim Hay, reports AdvisorHub.com.
The more than half-million-dollar settlement was in addition to Wells paying customers nearly $10 million for their losses in the energy stocks. Wells was also cited by FINRA for “failure to supervise” its brokers. “The financial advisors involved in this matter are no longer with the firm and we are pleased to have this matter behind us as the conduct at issue occurred between 2012 and 2015,” a Wells spokesperson stated.
Have you invested with brokers who have sold you inappropriate energy stocks that ignore your risk tolerance? FINRA and the SEC have strict rules on disclosing risk profiles on all investments sold by brokers and investment advisers. If they fail to fully inform you of downside risk, you may have a case in arbitration. Firms are also legally required by FINRA to monitor and supervise what their brokers are selling – their investments must be vetted and authorized by the firms – and have an obligation to investors to fully reveal true risk and return information about the vehicles sold. Investors can file FINRA arbitration complaints if these rules are broken.
If you invested in oil/gas related investments due to the recommendations of a financial advisor and lost money as a result, you may have a claim to pursue through FINRA Arbitration. Please contact Stoltmann Law Offices, P.C. at 312-332-4200 for a free, no obligation consultation with a securities attorney. Stoltmann Law Offices is a contingency fee law firm which means we do not get paid until you do!
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