The Law Offices of Jeffrey Pederson, PC represents investors suffering losses as the result of adviser mismanagement, such as the investment losses of investors of Geraldine Gordon of Ameriprise. Ms. Gordon has been accused by FINRA regulators of inappropriately recommending oil and gas investments. Concentrating such unorthodox investments in an investor’s portfolio can be unsuitable, which is mismanagement of a portfolio and in some cases fraudulent. Please call 1-866-817-0201 for a free and confidential consultation.
The regulatory filing highlights the plight of one such investor. On June 2013, Gordon recommended to one of her investors that she liquidate a number of
diversified investments in her Ameriprise brokerage and IRA accounts, which
comprised approximately half (49.9%) of her liquid net worth. Ms. Gordon recommended that
this investor use those assets to purchase a Master Limited Partnership (“MLP”) focused
on the energy-sector. This investment is believed to be an investment in oil and gas. The MLP’s prospectus described the investment as speculative.
Following Gordon’s recommendation, the investor invested a total of $334,000.00 in the
MLP investment through her Ameriprise brokerage and IRA accounts. The investor’s investment in the MLP comprised a large portion of the investor’s liquid net worth at the time.
FINRA Rule 2111, the FINRA suitability rule, provides that when recommending the purchase, sale, or exchange of any security to an investor, a securities broker “must have a
reasonable basis to believe that a recommended transaction [...] is suitable for the
customer, based on the information obtained through the reasonable diligence of
the member or associated person to ascertain the customer’ s investment profile.”
Gordon’ s recommendation that her investor invest half of her liquid net worth in this
single sector-focused, in this case an oil and gas, MLP was not suitable for the investor in light of the investor’s financial condition and the excessively concentrated nature of the investment.
Many state regulators have rule the suitability requirement even more restrictively. Some have limited the investment in such an investment to 10% of the investor’s liquid net worth.
One of the concerns with MLP investments is that many pay an extremely high commission to the broker, which is usually not disclosed. This can cause some brokers to recommend MLPs despite the inherent risks in the investment to those who cannot afford to take such risks.