Investment Lawyer

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 Merrill Lynch Broker John Boukamp

January 22, 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 John Boukamp (Boukamp). According to BrokerCheck records there are at least 10 customer complaints that have been filed against Boukamp. The most recent customer complaint against Boukamp filed in November 2013 alleges that Boukamp, from December 2011 until September 2013 engaged in excessive trading, sometimes referred to as churning, and made unsuitable investments. This complaint was denied. In October 2013, another customer complained and alleged unsuitable investment recommendations and unauthorized trading from June 2012 to September 2012 resulting in a loss of $522,000. The case was resolved with the customer receiving $275,000.

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 Boukamp 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.

Investor Recovery Options for NGL Energy Partners (NGL) Losses

January 20, 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. NGL Energy Partners (Ticker Symbol: NGL) is a Master Limited Partnership (MLP). About 86% of the total MLP securities market, a $490 billion sector, can be attributed to energy and natural resource companies. NGL Energy Partners has declined 66.9% in value from its 52-week high and is trading at only $11.14 a share. NGL Energy Partners business focuses in the oil and gas midstream sector.

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.

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.

Investor Recovery Options for Teekay LNG Partners (TGP) Losses

January 15, 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. Teekay LNG Partners (Ticker Symbol: TGP) is a Master Limited Partnership (MLP). Teekay LNG Partners has declined 68.2% in value from its 52-week high and is trading at only $13.79 a share. Teekay LNG Partners business focuses in the liquid natural gas shipping sector.

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.

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.

Investor Recovery Options for Rose Rock Midstream (RRMS) Losses

January 14, 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. Rose Rock Midstream (Ticker Symbol: RRMS) is a Master Limited Partnership (MLP). Rose Rock Midstream has declined 69% in value from its 52-week high and is trading at only $16.74 a share. Rose Rock Midstream business focuses in the oil pipelines and storage sector.

About 86% of the total MLP securities market, a $490 billion sector, can be attributed to energy and natural resource companies. According to Bloomberg, many oil companies are in trouble and are going bankrupt as U.S. high-yield debt issued to junk-rated energy companies grew four-fold to $208 billion. The bankruptcies have been devastating causing forced selling at fire sale prices. For example, Dune Energy had reserves valued at more than $1 billion but sold those oil fields for only $19 million. The situation is only getting worse with lenders running out of options to put off debts. Most of these companies are now struggling to stay afloat with oil prices at $45.

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.

Hercules Offshore Investor Recovery Options

January 10, 2016 | by Staff Attorney

According to Bloomberg, Hercules Offshore Inc., (Hercules Offshore) is the owner of the largest fleet of shallow-water drilling rigs in the Gulf of Mexico when it filed for bankruptcy in August 2015. Debt issues by Hercules Offshore and drilling rig provider Paragon Offshore were among the worst-performing oil and gas service bonds in the high-yield energy index.

The company plans to use the bankruptcy to cut $1.2 billion in debt and for investors to trade their senior notes for almost 97 percent of Hercules’s equity. In addition, noteholders would also lend the company $450 million to finish building a new oil-drilling rig. Meanwhile, the number of rigs operating in the Gulf of Mexico has fallen by more than half from last year’s high of 63 by August 2015.

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.

Investor Recovery Options for Navios Maritime Partners (NMM) Losses

January 10, 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. Navios Maritime Partners (Ticker Symbol: NMM) is a Master Limited Partnership (MLP). Navios Maritime Partners has declined 77.6% in value from its 52-week high and is trading at only $3.18 a share. Navios Maritime Partners business focuses in the dry bulk shipping sector.

About 86% of the total MLP securities market, a $490 billion sector, can be attributed to energy and natural resource companies. According to Bloomberg, many oil companies are in trouble as U.S. high-yield debt issued to junk-rated energy companies grew four-fold to $208 billion. Most of these companies are now struggling to stay afloat with oil prices at $45. Many of these companies relied upon high energy prices in order to sustain their operations. As reported by the Wall Street Journal the drop in oil and energy prices and the industry downturn has made it difficult for many companies to refinance their debts.

However, brokers that have recommended MLPs to investors may have made unsuitable recommendations based upon the yields of these investments rather than the risk to principal. Over the past year MLPs have been hammered due to weaknesses in oil and gas and commodities markets.

Franklin High Income Fund Investors May Have a Volatile Road Ahead

January 8, 2016 | by Staff Attorney

The investment attorneys of Gana Weinstein LLP are investigating potential recovery options for investors in the Franklin High Income Fund. The Fund invests in high-yield debt and securities. However, according to a Morningstar analysis the fund declined 9.7% through November 2015, making it one of the worst performers in the high-yield bond fund Morningstar tracks.

An analysis of the Franklin Fund’s woes reveals that there may be more investor pain in the future for the fund. The fund is struggling due to the 2015 sell-off in commodities and energy sectors. The Fund has taken an outsized position in this industry and these assets make up 22% of total portfolio as of October 2015. According to Morningstar, the Franklin Fund’s investment team is not afraid to make big bets in troubled names and may continue to add to its positions. If the bonds bounce back, returns are boosted. But this strategy is not suitable for most investors and can pressure the performance of the fund. In addition, these risks are heightened due to the lack of liquidity for many energy related high yield bonds. Once a position is established it may be difficult for the Fund to back out later.

In addition, the portfolio may appear less risky to investors when looking at the credit quality of its holdings but as was the case in the lead up to the 2008 financial crisis, the ratings are misleading. For example, the Franklin Fund held a 17.2% position in bonds rated CCC or lower and under 1% in unrated bonds. However, according to Morningstar, only 15% of the energy sector holdings are rated CCC or below even though the majority of energy bonds are trading at distressed level pricing and reflecting greater credit risk. Thus, a larger portion of the fund is trading at very distressed levels then would appear by just looking at the credit ratings alone.

Broker Investigation: Advisor Dennis Riordan

January 7, 2016 | by Staff Attorney

The investment lawyers of Gana Weinstein LLP are investigating customer complaints against broker Dennis Riordan (Riordan). According to Riordan’s BrokerCheck records there are at least 3 customer complaints against Riordan, 1 judgment or lien, and 2 criminal matters. The customer complaints against Riordan allege a number of securities law violations including that the broker made unsuitable investments, excessive trading, and failure to follow instructions among other claims.

The most recent disclosure filed in February 2015 concerns a tax lien for $33,287. Tax liens and judgements are often a sign that the broker cannot manage their own personal finances and may be tempted to recommend high commission products or strategies to clients in order to satisfy debts. The most recent complaint against Riordan was filed in December 2013 and alleges an unsuitable recommendation in a private placement security.

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.

Investor Recovery Options for Foresight Energy LP (FELP) Losses

January 5, 2016 | by Staff Attorney

The law offices of Gana Weinstein LLP continue to report on investor related losses and potential legal remedies due to unsuitable recommendations to investor in oil and gas and commodities related investments. Foresight Energy LP (Ticker Symbol: FELP) is a Master Limited Partnership (MLP). Foresight Energy has declined 84.5% in value from its 52-week high and is trading at only $2.9 a share. Foresight Energy business focuses in the coal production sector.

About 86% of the total MLP securities market, a $490 billion sector, can be attributed to energy and natural resource companies. MLPs contain significant risks. MLPs tend to fluctuate wildly with the price of oil and gas. For example in 2008, when oil plummeted in the wake of the great recession the AMZ MLP Index declined by 36.9% in a single year. In addition, MLPs often grow their distributions at an accelerated rate in their first two years in order to attract positive research reports from Wall Street analysts. The increased distributions and positive reports serve to drive the stock price higher even though the long term yield of these MLPs are speculative and unknown.

However, brokers that have recommended MLPs to investors may have made unsuitable recommendations based upon the yields of these investments rather than the risk to principal. Over the past year MLPs have been hammered due to weaknesses in oil and gas and commodities markets.