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State Securities Regulators Warn Of Prevalent Oil and Gas Investment Fraud

State securities regulators around the country warn that high oil prices that prevailed until recently created a heightened interest in investments in energy-related business ventures- ventures that may lead to losses now that oil prices have plummeted to the $45 a barrel range (from around $100 a barrel in recent months)

Oil and gas investments come in various forms, including limited partnerships (“LPs”), fractional ownership interests in leases, and general partnerships. In a drilling limited partnership, an oil or gas company sells partnership units to investors and uses the money it raises to lease property and drill wells. These limited partnerships often charge high upfront fees of about 15-16% of the initial investment and the sponsor may also take a share of any profits. Such limited partnerships are highly risky, are illiquid (meaning they can’t easily be resold by the initial investor) and can have a long holding period.

Unfortunately the field of oil and gas investments has a history of attracting dishonest promoters. Common sales techniques associated with dishonest promoters may include repeated unsolicited phone calls to members of the public featuring false representations such as purported successful track records of the promoter, or secret information concerning oil finds. Some of these investments sold over the phone through high pressure sales tactics may be out and out frauds.

Even legitimate brokerage firms may also recommend private placement investments to investors for whom they are not suitable, motivated by the high sales commissions offered by promoters. Suitability claims arise when stockbrokers or investment advisors recommend investments that are not appropriate for an investor’s financial circumstances, risk tolerance, or investment goals. If advisors make unsuitable recommendations, the investor may be able to recover damages through arbitration proceedings administered by the regulatory agency Financial Industry Regulatory Authority, or “FINRA.”


If you have suffered significant losses as a result of your investment in oil and gas funds, you may have a valid securities arbitration claim. To find out more about your legal rights and options, contact a securities fraud attorney at The Law Office of Christopher J. Gray at (866) 966-9598 or for a no-cost, confidential consultation.

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