Master limited partnerships are publicly-traded limited partnerships traded on qualifying exchanges under Section 7704 of the Internal Revenue Code. MLPs combine the liquidity associated with publicly traded securities with tax benefits associated with limited partnerships. Billions of dollars have been invested in MLP exchange-traded funds and MLP mutual funds in recent years, much of which was concentrated in oil, gas and energy investments. Oil and gas investments structured as MLPs have faced significant losses due to declining oil prices, leaving investors down 50 percent or more from the original amount invested.
Investors can take action if a financial advisor recommended inappropriate investments in master limited partnerships or if a financial advisor over-concentrated your portfolio in MLPs. Zamansky LLC has experience with MLP investment fraud and represents those whose brokerage firms made bad bets on MLPs. Call us today to speak with an MLP lawyer to learn more about whether you may have a claim.
The Rights of Investors After Fraud In Connection with MLPs
MLPs became a popular investment choice when interest rates were low because master limited partnerships distribute the money which they earn. Investors, particularly retirees frustrated with earning small amounts of interest on bonds and certificates of deposit, flocked to MLPs at a record pace. Sales pitches targeted towards conservative investors often conflated MLPs with bonds, which they are not, and many brokers and financial advisors assured investors that these were safe investments which would provide high returns with limited or no risk.
In order to be classified as an MLP, the limited partnership is required to derive the majority of its cash flow from real estate investments or from investments in natural resources or commodities. Oil and gas investments were popular options for MLPs. For a time, these investments were paying off for investors, with yields approaching 10 percent or higher in some cases. Unfortunately, when oil and gas commodity prices fall, MLP prices can drop dramatically. In many cases, the yield payments cease. In the worst cases, the MLPs became illiquid and investors were unable to sell their ownership interest.
Investors who trusted brokers or money managers and invested in MLPs have paid the price for the tremendous losses they suffered as oil and gas prices nosedived. Now, many investors are taking action against financial advisors, money managers, and brokers who provided misleading information, violated sales practice rules, over-concentrated portfolios in MLPs or otherwise misled investors.
Get Help from a Lawyer with Investment Fraud Experience
Investment fraud cases involving master limited partnerships can be challenging, as you must prove that the MLP investments were marketed with misleading information or purchased for you inappropriately by financial advisors. Zamansky LLC understands the laws applicable to MLPs and our legal team can assist in exploring all available options for recovering your losses. Contact us as soon as possible to speak with a lawyer experienced in MLP fraud.