Update for SandRidge Energy and Hercules Offshore Bond Investors

Wednesday, March 4th, 2015

The White Law Group continues to investigate the liability that brokerage firms may have for recommending risky investments in shale energy companies and their leveraged debt (primarily in the form of junk bonds).

Two of the most leveraged companies in the energy space — Hercules Offshore and SandRidge Energy  – have recently been downgraded by separate analysts to zero, signally significant concern in these two companies ability to repay their debt.

As of Feb. 15, Hercules had only 10 of its 24 rigs working, with four of those working rigs completing their contracts within the next three months.

SandRidge bonds are now trading at under 70 cents on the dollar for a more than 14% yield. Recently, KLR Group downgraded SandRidge to zero.

Here is a listing of the SandRidge bond offerings:

 

Sandridge Engy 7.5% 03/15/2021 1,175.0 70.9 7.500 Fixed No No 15.00
Sandridge Engy 7.5% 03/15/2021 900.0 7.500 Fixed No No
Sandridge Engy 7.5% 02/15/2023 825.0 69.3 7.500 Fixed No No 14.04
Sandridge Engy 7.5% 02/15/2023 825.0 7.500 Fixed No No
Sandridge Engy 144A 7.5% 02/15/2023 825.0 7.500 Fixed No Yes
Sandridge Engy 8% 06/01/2018 750.0 8.000 Fixed No No
Sandridge Engy 8.125% 10/15/2022 750.0 0.0 8.125 Fixed No No
Sandridge Engy 144A 8.125% 10/15/2022 750.0 8.125 Fixed No Yes
Sandridge Engy 8.125% 10/15/2022 750.0 73.4 8.125 Fixed No No 13.89
Sandridge Engy 8.625% 04/01/2015 650.0 8.625 Fixed Yes No
Sandridge Engy 8.75% 01/15/2020 450.0 8.750 Fixed No No
Sandridge Engy 144A 8.75% 01/15/2020 450.0 8.750 Fixed No Yes
Sandridge Engy 8.75% 01/15/2020 450.0 77.6 8.750 Fixed No No 15.47
Sandridge Engy 9.875% 05/15/2016 365.5 9.875 Fixed Yes No
Sandridge Engy 7.5% 03/15/2021 275.0 7.500 Fixed No No
Sandridge Engy 144A 7.5% 03/15/2021 275.0 7.500 Fixed No Yes
Sandridge Engy 144A 7.5% 03/15/2021 0.002 7.500 Fixed No Yes

 

 

Here is a listing of the Hercules bond offerings:

Hercules Offshore 8.75% 07/15/2021 400.0 41.5 8.750 Fixed No No 29.67
Hercules Offshore 144A 8.75% 07/15/2021 400.0 8.750 Fixed No Yes
Hercules Offshore 7.5% 10/01/2021 300.0 34.8 7.500 Fixed No No 31.58
Hercules Offshore 144A 7.5% 10/01/2021 300.0 7.500 Fixed No Yes
Hercules Offshore 144A 6.75% 04/01/2022 300.0 6.750 Fixed No Yes
Hercules Offshore 7.125% 04/01/2017 300.0 7.125 Fixed Yes No
Hercules Offshore 6.75% 04/01/2022 300.0 43.0 6.750 Fixed No No 23.36
Hercules Offshore 10.5% 10/15/2017 300.0 Middle 102.8 10.500 Fixed No No 9.80
Hercules Offshore 144A 10.25% 04/01/2019 200.0 10.250 Fixed No Yes
Hercules Offshore 10.25% 04/01/2019 200.0 113.3 10.250 Fixed No No 6.94
Hercules Offshore 144A Cv 3.375% 06/01/2038 83.1 3.375 Fixed Yes Yes
Hercules Offshore 144A 7.125% 04/01/2017 79.9 7.125 Fixed Yes Yes
Hercules Offshore 144A 10.5% 10/15/2017 46.3 Middle 10.500 Fixed No Yes
Hercules Offshore Cv 3.375% 06/01/2038 7.027 100.0 3.375 Fixed Yes No 3.37
Hercules Offshore 10.5% 10/15/2017 10.500 Fixed Yes

 

Investors in these companies have options.  If you purchased investments in SandRidge or Hercules at the recommendation of your financial advisor, you may have recourse.

Brokerage firms are required to perform due diligence on any investment they recommend and to ensure that all recommendations are suitable in light of the client’s age, investment experience, net worth, income, and investment objectives.  If they fail to do either, they can be held liable for losses in a FINRA arbitration claim.

To discuss your litigation options, please call the securities attorneys of The White Law Group at 312/238-9650 for a free consultation.

The White Law Group is a national securities fraud, securities arbitration, and investor protection law firm with offices in Chicago, Illinois and Vero Beach, Florida.

For more information on the firm, visit http://www.whitesecuritieslaw.com.

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FINRA Arbitration Statistics through early 2015

Tuesday, March 3rd, 2015

FINRA recently reported updated statistics on the number and type of arbitration claims being filed in 2015 relative to previous years.  For the full statistics published by FINRA, visit http://www.finra.org/ArbitrationAndMediation/FINRADisputeResolution/AdditionalResources/Statistics/.

A couple of thoughts on the numbers:

(1) Filings for January 2015 are down 21% from the previous year – This is likely a reflection of the upward moving market in 2014 and the fact that the last market correction was back in 2008.  Although bad financial advisors are ripping off their clients all of the time, clients rarely realize it in an upward moving market.  It is not until the market corrects that many of these bad acts are flushed out, so when the market rises it is not surprising that filings would be down.

(2) 21 Churning claims filed in January 2015 – When the market is rising, you often see a rise in churning claims as well.  Likely because bad advisors think it is easier to whitewash high turnover (and high commissions) so long as the account continues to be profitable – which is obviously easier to do when the market is up over 30% as it was in 2014.  We would anticipate a continued increase in the number of churning claims as long as the market continues this bull run.

(3) The most complained about security type was common stock.  This is a departure from the last few years.  Again, likely a reflection of the upward moving market.  When the markets rise, complex structured products (like non-traded REITs, limited partnerships, private placements) are generally rising as well, thereby reducing the number of claims brought involving such products.  However, when the market does correct, we would anticipate a spike in claims involving structured products because ultimately these are the products with the highest commissions and therefore the highest incidence of abuse by bad advisors looking to maximize their compensation.

(4) No auction rate securities cases.  This isn’t surprising.  These claims have decreased over the last few years as regulators have stepped in and most firms have agreed to buy back the investments from their clients.

(5) 78% of FINRA cases filed ended with a settlement between the parties.  This number has remained consistent over the last few years and confirms that the majority of cases filed with FINRA do end up settling.  This is likely due to the arbitrary nature of FINRA arbitration and the risk both sides take leaving their fates up to FINRA arbitration panels.  It seems that most parties in FINRA arbitration claims would prefer the certainly of settlement over the uncertainly of what a FINRA panel may rule.

(6) Only 38% of FINRA claims taken to hearing resulted in an award for the Claimant (down from 47% in 2010).  We would attribute this to arbitrator fatigue.  Arbitrators have been listening to claims coming out of the 2008 market correction for approximately 7 years now and it is natural for them to start comparing the newer cases to prior cases they already heard.  When those cases are not as strong as a case they previously heard, it becomes that much more difficult to convince them to award damages.  These statistics may continue to decline until another market event occurs.

The foregoing information is the opinion of the FINRA arbitration attorneys of The White Law Group.  The firm represents investors in FINRA arbitration claims throughout the country.  For a free consultation with a securities attorney, please call the firm’s Chicago office at 312/238-9650.  For more information on the firm, visit http://www.whitesecuritieslaw.com.

 

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Securities Investigation involving UBS’s V10 Enhanced FX Carry Strategy

Monday, March 2nd, 2015

According to reports, a lawsuit was recently filed  against UBS Group for selling its V10 Enhanced FX Carry Strategy product without allegedly explaining the risk and complexity of the investment.

The lawsuit reportedly further alleges that UBS’s V10 Enhanced FX Carry Strategy was pitched as a high-yielding foreign-exchange investment that used computer algorithms to minimize the risk of losses in periods of volatility.

To compound matters for investors in this product, now investigators at the Department of Justice are reportedly examining whether UBS traders shortchanged investors in UBS’s V10 Enhanced FX Carry Strategy by overcharging them when they carried out the currency trades needed to execute the strategy.

The White Law Group is investigating the liability that brokerage firm’s may have for recommending this risky investment.  Brokerage firms are required to perform adequate due diligence on any investment they recommend and to adequately disclose the risks of any investment.  Additionally, brokerage firms are required to ensure that all investment recommendations made are suitable in light of the client’s age, investment experience, investment objectives, net worth, and income.

To the extent that a brokerage firm fails to perform adequate due diligence, to properly disclose the risks, or recommends an investment unsuitably, the firm may be held responsible for any resulting losses in a FINRA arbitration claim.

According to the offering materials, investors in UBS’s V10 Enhanced FX Carry Strategy bought notes whose value was tied to an index called the V10. Marketing documents on UBS’s website show how the index was calculated: First, currencies from the Group of 10 countries are ranked daily by their one-month interest rates. Using forward contracts, the bank bets that the three highest-yielding currencies will advance and the three lowest will decline. When volatility rises above a predetermined level, the positions are reversed.

Betting on the currency market is extremely risky and should only be undertaken by extremely sophisticated and/or institutional investors.

Investing in UBS’s V10 Enhanced FX Carry Strategy may not be suitable for you if:

¨ You seek an investment that offers any principal protection.
¨ You are not willing to accept the risks of foreign exchange trading in general.
¨ You do not believe the Index Return will be positive.
¨ You are not willing to make an investment that will be exposed to both upside and downside price risks on long and short positions in the foreign exchange forward contracts underlying the UBS V10 Currency Index as they may be dynamically adjusted in response to market conditions.
¨ You prefer lower risk (and accept the potentially lower returns) of fixed income investments with comparable maturities and issuer credit ratings that bear interest at a prevailing market rate.
¨ You seek current income from your investments.
¨ You are unable or unwilling to hold the Securities to maturity.
¨ You seek an investment for which there will be an active secondary market.
¨ You are not willing or are unable to assume the credit risk associated with UBS, as issuer of the Securities.

Unfortunately it appears that some financial advisors may have downplayed these risks and recommended UBS’s V10 Enhanced FX Carry Strategy unsuitably.

If you invested in UBS’s V10 Enhanced FX Carry Strategy and you would like to discuss your litigation options, please call the securities attorneys of The White Law Group at 312/238-9650 for a free consultation.

The White Law Group is a national securities fraud, securities arbitration, and investor protection law firm with offices in Chicago, Illinois and Vero Beach, Florida.

For more information on The White Law Group, visit http://www.whitesecuritieslaw.com.

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Investigation into United Realty Trust

Friday, February 27th, 2015

Recent news regarding the real estate investment trust, United Realty Trust, may be of concern to some investors. According to Investment news, a former executive of Cabot Lodge securities, Al Akerman, sent a letter to the SEC’s Office of the Whistleblower regarding “apparent accounting irregularities and alleged fraud” concerning the REIT.

According to InvestmentNews, Mr. Akerman’s letter alleges “apparent accounting irregularities and alleged fraud with United Realty Trust.” Furthermore the letter alleges that “the REIT was going to fail an assets test because of a $1.5 million liability that was owed to the REIT by its adviser, United Realty Advisors LP.”

Counsel for United Trust have called into question Mr. Akerman’s truthfulness in the matter, according to investment news, alleging Mr. Akerman’s claim of being a whistleblower was done to conceal his alleged criminal behavior.

REITs are undoubtedly complex products that are arguably unsuitable for many investors. Compared to traditional investments, such as stocks, bonds and mutual funds, REITS are considerably more complex and involve a high degree of risk. Unfortunately many investors were not made adequately aware of the risks and lack of liquidity associated with REITs.

Broker dealers are required to perform adequate due diligence on any investment they recommend and to If broker fails to make suitable investment recommendations or fail to adequately disclose the risks, they may be liable for investment losses.

If you have concerns about your investment in United Realty Trust or another REIT, please contact The White Law Group at (312) 238-9650 for a free consultation.

The White Law Group is a national securities fraud, securities arbitration, and investor protection law firm with offices in Chicago, Illinois and Vero Beach, Florida.

For more information on the firm, visit www.WhiteSecuritiesLaw.com.

 

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Jason Muskey Accused of Fraud

Friday, February 20th, 2015

Have you suffered financial losses as a result of investments made with Jason Muskey? If so, The White Law Group may be able to help you recover your investment losses through an arbitration claim with the Financial Industry Regulatory Authority (FINRA).

According to a press release from the United States Attorney’s Office for the Middle District of Pennsylvania, criminal charges have been filed against Jason Muskey for allegedly diverting nearly $2 million from clients accounts. Muskey is charged with mail fraud, money laundering and identity theft.

Allegedly, through his business, Muskey Financial Services, he forged client’s signatures to deposit money from their investment account into his personal account. In addition, when clients wanted to make withdrawals from their accounts, Muskey allegedly took funds from other clients accounts to purchase cashier checks to pay the client. The alleged wrongdoing occurred over a seven year period between 2007 to 2014.

It is unclear if investors will be able to get their money back from Muskey. According to the press release, the government is seeking forfeiture of Muskey’s assets, properties in Pennsylvania, a time share in the Grand Cayman Island and two boats.

The White Law Group is investigating the potential liability of the brokerage firm that employed Muskey has for his actions. When a FINRA affiliated broker fails to follow industry rules and allegedly steals from clients, the brokerage firm may be liable for negligent supervision and may be responsible for losses in a FINRA arbitration claim.

According to Jason Muskey’s BrokerCheck Report he worked in Pennsylvania with MetLife Securities from 01/2003 – 12/2005, Carillon Investments from 01/2006 – 06/2006, and most recently with Ameritas Investment Corp from 06/2006 – 06/2014.

If you believe that you’re a victim of Jason Muskey while he was employed by a FINRA affiliated brokerage firm and would like to discuss your legal options with a securities attorney, please call The White Law Group at (312) 238-9650 for a free consultation.

The White Law Group, LLC is a national securities fraud, securities arbitration, investor protection, and securities regulation/compliance law firm dedicated to the representation of investors in FINRA arbitration claims against brokerage firms throughout the United States. The firm’s offices are located in Chicago, Illinois and Vero Beach, Florida.

For more information on The White Law Group, please visit our website at www.WhiteSecuritiesLaw.com.

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