FINRA Boots 2 Brokers for Energy Sector Overconcentration

It’s unlawful for investment advisors to overconcentrate their clients into one sector of the economy. Nevertheless, in recent years, numerous brokers have put all of their clients “eggs” into the highly volatile energy sector basket — which includes oil and gas securities.

Some of these investors have lost big due to energy sector overconcentration, and the Financial Industry Regulatory Authority (FINRA) is taking notice.

FINRA Cracks Down on Energy Sector Overconcentration

FINRA is cracking down on brokers and brokerage firms for overconcentrating their clients into unsuitable energy sector investments. In some cases, the regulator is requiring advisors and firms to compensate their clients for oil & gas securities fraud losses. Moreover, FINRA has booted certain “bad brokers” from the industry entirely.

In early December, FINRA booted two Wells Fargo investment representatives from the financial industry. FINRA determined that the brokers overconcentrated 50-plus clients into four energy stocks that caused devastating financial damages. FINRA determined the investment advisors breached their fiduciary duty to recommend suitable investments to the clients in these cases. Fortunately, the brokers will not have the opportunity to do this to another client again.

Don’t Let Them Get Away It

Look for energy sector overconcentrationEvery investment advisor must adhere to a code of ethics known as a “fiduciary duty.” This fiduciary duty requires the advisor to obtain accurate information about his or her customer, so the advisor can recommend suitable investments that reflect his or her client’s best interests and needs.

If your broker risked your money by overconcentrating you into unsuitable energy sector investments – and you lost money because of it – you might be able to file a claim to get your money back. The Michael Brady Lynch Firm is available to discuss your securities negligence claim with you. We’ll answer your questions about investment fraud, investment advisor negligence and educate you on your legal rights.

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