Lawsuits Mount over Investor Energy Stocks Losses

Energy and Gas Stock Bubble Burst

The latest stock market bubble burst has left many retail investors with serious losses in their retirement savings. Regulators and securities attorneys who specialize in finance and investing issues have noticed a huge uptick in lawsuits over losses due to overconcentration in the energy sector.


Starting a few years ago, financial advisors across the country began investing heavily in oil, gas, and energy stocks on behalf of clients looking for higher-yield investments. Over time, many of these financial advisors accumulated an overconcentration of these high-risk securities in the portfolios they manage. This naturally tendency to want “too much of a good thing” has, thanks to the collapse of oil prices and the energy sector in general, experienced a terrific backlash. That backlash has been particularly severe as a result of the lack of downside or hedge protection sought by financial advisors who fell in love with energy and thought oil especially would forever be scarce - the fracking boom turned that old assumption on its head.

Wave of Lawsuits over Investment Losses in Energy Sector

The Financial Industry Regulatory Authority which oversees the financial industry has noted a significant wave of new litigation over unsuitable recommendations made by financial advisors in relation to energy stocks. Many retails investors who suffered tremendous losses in their retirement savings accounts may not even be aware that their accounts are overconcentrated in any particular sector until it is too late. Often these same investors will be kept in the dark by their financial advisors and will not recognize the names and/or symbols of gas, energy, and oil securities lurking in their portfolios.

While every investor would like strong returns from their investments, financial advisors have a legal obligation to choose and maintain a portfolio that is at all times suitable for their clients’ investment objectives and risk-tolerance level. “At all times” means that even though a particular allocation of energy stocks may have at one time been suitable for a customer, the erosion of value and increase in risk affecting those stocks and/or their sector may in time tip the balance into unsuitability or overconcentration. In such cases, an investor may seek compensation for losses resulting from negligence and unsuitable investments through FINRA’s arbitration process.

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