Master Limited Partnerships (MLPs) and Oil and Gas Investments
The equity markets have faced a lot of turbulence in the last few weeks with the emergence of COVID-19, a coronavirus. The S&P 500 and Dow Jones indexes have plummeted. As an example, the S&P 500 dropped from about 3300 to 2400 from February 19, 2020 to March 17, 2020.
Oil prices have also faced a lot of volatility in the last month as well. This will likely cause significant strain on the share price and value of many oil and gas investments, including Master Limited Partnerships, or MLPs Master Limited Partnerships are investments that combine the tax benefits of a limited partnership but have the liquidity of a common stock. By law, the Master Limited Partnerships must earn 90% of its income through activities related to natural resources, commodities, or real estate.
While these Master Limited Partnerships can be quality investments, they are also subject to market fluctuations, including volatility tied to the stock markets. This has caused significant losses in some MLPs over the last month. For example, one MLP – NGL Energy Partners – lost about 80% of its value recently. NGL Energy Partners (stock symbol NGL) was listed around $14 per share in September 2019, and now NGL Energy is trading around $2.75 per share.
Financial advisors and stockbrokers who recommended MLP investments (and other oil and gas investments) have a duty to disclose all material risks to investors. Moreover, the MLP investments, like NGL Energy, must be suitable for the investor, considering the investors’ risk tolerance, investment objectives, age, financial resources, and other factors. If the financial advisor makes unsuitable investment recommendations in MLPs or other oil and gas investments, the advisor or his brokerage firm may be liable for losses.
Israels & Neuman PLC is a securities and investment fraud law firm with offices in Denver, Colorado; Seattle, Washington; Phoenix, Arizona; and Ann Arbor, Michigan. We represent investors in FINRA arbitration proceedings in all 50 states. Our attorneys have represented over one thousand investors against many brokerage firms in the past.