Securities Lawyers Blog
The law offices of Gana Weinstein LLP continue to report on investor related losses and potential legal remedies due to recommendations to investor in oil and gas and commodities related investments. One particularly hard hit area of the commodities bust have been oil private placements sold by many brokerage firms. Once private placement that has come under scrutiny by the SEC are the Coachman Energy and Bakken Drilling private placements.
The SEC settled an action where the agency alleged that Coachman Energy Partners LLC failed to adequately disclose its methodology for calculating the management fees and expenses it charged to the funds from 2011 through 2014. The SEC found that the investment adviser for four private placement oil and gas funds miscalculated by approximately $1.1 million in management fees and $449,000 in management-related expenses. In addition, the SEC found that Randall Kenworthy, the firm’s CEO, caused Coachman’s inadequate disclosures in documents and in Coachman’s ADV Forms. Further, there were undisclosed conflicts of interests as one of the funds entered into a transaction with an affiliated entity without proper disclosure or obtaining investor consent.
Bakken Income Fund has raised $20.6 million from 309 investors. As part of the settlement, Coachman agreed to disgorge over $2 million. Coachman and Kenworthy are believed to be involved with the following private placement investments:
- Bakken Drilling Fund III LP
- Bakken Drilling Fund IV LP
- Bakken Drilling Fund IVB LLC
- Coachman Energy Land II LLC
- Coachman Energy VI LP
- Coachman Energy VIB LLC
- Coachman Energy VII Offshore Feeder Fund LTD
- Coachman Energy VII Onshore Feeder Fund LP
Brokerage firms that sell private placements have obligations to conduct due diligence on the investment before recommending it to their clients. The due diligence rule stems from FINRA Rule 2310 that states that a brokerage firm must have reasonable grounds to believe that a recommendation to purchase a security is suitable for the customer. Brokerage firms are required to exercise a high degree of care in investigating and independently verifying an issuer’s representations and claims. FINRA has stated that a brokerage firm has a “special relationship” with a customer from the fact that in recommending the security, the brokerage firm represents to the customer that a reasonable investigation has been made.
Our firm is investigating potential securities claims against brokerage firms over sales practices related to the recommendations of oil & gas and commodities products such as exchange traded notes (ETNs), structured notes, private placements, master limited partnerships (MLPs), leveraged ETFs, mutual funds, and individual stocks. Investors who have suffered losses may be able recover their losses through securities arbitration. Our consultations are free of charge and the firm is only compensated if you recover.