Lufrano Law, LLC is currently investigating claims against financial advisors and brokerage firms for the inappropriate sale of risky and speculative oil and gas royalty trust investments, like BP Prudhoe Bay Royalty Trust, to investors throughout the United States. Unfortunately, we have spoken to many investors who have seen their retirement savings dwindle due to inappropriate investments in oil and gas royalty trusts.
If you were recommended BP Prudhoe Bay Royalty Trust by a financial advisor, you may be able to recover your investment losses as explained below.
A royalty trust is a corporation that is usually involved in oil and gas production or mining. The royalty trust does not actually operate the oil or gas field, but rather, the trust owns rights to royalties from the oil or natural gas wells, the mineral rights of wells, or mineral rights on other types of properties.
Royalty Trusts are usually recommended to investors for their relative tax benefits and high income. However, the saying “high risk high reward” applies here. Many investors are unaware of the risks associated with royalty trusts, primarily because royalty trusts are complex and unfamiliar investments. Accordingly, some investors unnecessarily and unknowingly exposed all or part of their life savings to significant losses.
Why are Royalty Trusts Risky?
Royalty trusts are risky because trading commodities (oil and gas) and the mining of commodities, in general, are risky businesses. The major risk factors associated with royalty trust include:
- Oil trusts are depleting assets, which means they have a finite life and do not last forever. Once the oil or gas from a trust’s field is exhausted, the trust will close and the share price will drop to zero.
- Royalty trusts are essentially a way to gain exposure to the price of oil or natural gas. As a result, any fluctuations in commodity prices will affect trust income and therefore share prices.
- Some trusts, but not all, have “automatic cost acceleration” provisions or other provisions that adversely affect the share value of the trust under certain conditions. This means that if certain predetermined conditions occur, then the periodic payouts will decline over time (thereby defeating one of the main purposes of the investment).
These risks may not have been properly explained or disclosed to you. So what can you do?
How Investors May Recover Investment Losses in BP Prudhoe Bay Royalty Trust
Investors who were inappropriately recommended risky oil and gas investments like BP Prudhoe Bay Royalty Trust may be eligible to bring claims against their financial advisor and/or brokerage firm. Some investors we have spoken with complain that their financial advisor did not explain the investment. Other investors claim that their financial advisor recommended too high a concentration of oil and gas investments in their accounts.
If this sounds familiar, then you may be able to sue your financial advisor and/or brokerage firm to recover the losses you sustained as a result of investing in BP Prudhoe Bay Royalty Trust.
Lufrano Law, LLC is a national securities litigation firm and has experience representing investors who have investment disputes with financial advisors, brokers and broker-dealers. We may be able to help you recover your losses through a FINRA arbitration claim against the brokerage firm that recommended the investment. We offer free consultations to all investors. Please contact one of our attorneys at (800) 627-2179 to schedule a free consultation or complete our free case evaluator.