The Law Firm of David R. Chase, headed by former SEC Prosecutor and stockbroker fraud lawyer, David R. Chase, is investigating possible customer claims of unsuitability and over-concentration with respect to Morgan Stanley Smith Barney’s (Morgan Stanley) representatives’ recommendations of Cobalt International Energy (ticker: CIE) and Seadrill Ltd. (ticker: SDRL). The share prices of Cobalt and Seadrill have plummeted in the last few months causing substantial monetary losses to holders of these stocks.
The law firm’s investigation focuses on whether Morgan Stanley’s registered representatives made unsuitable and inappropriate investment recommendations when soliciting Cobalt and Seadrill to their retail customers, and whether the recommendations caused an inappropriate and dangerous over-concentration of these stocks in the customer’s portfolio.
Stock brokers have an obligation under the law and securities industry rules to make only suitable and appropriate recommendations based upon the customer’s investment objectives, risk tolerance, time horizon and other factors when soliciting an investment. While an investment may be suitable when it constitutes only a small percentage of the investor’s overall portfolio, it may become unsuitable if it comprises a substantial percentage of the portfolio, usually in excess of 25%. This is called over-concentration (too many eggs in one basket) and it carries with it a significant risk of loss. Overconcentration may involve one particular stock, or an over-weight in a particular industry or sector.
Cobalt International Energy, which Morgan Stanley followed and recommended institutionally, and Seadrill Ltd, of which Morgan Stanley was a large institutional owner of its stock totaling over 14 million shares as of September 30, 2014, according to Morningstar — are both in the oil and gas sector. Accordingly, those Morgan Stanley customers who were sold Cobalt or Seadrill, or both, in amounts that alone or cumulatively exceed 25% of their overall portfolio may have a claim to recover their investment losses on the basis of an unsuitable overconcentration.
If you are a Morgan Stanley customer who has sustained losses in either Cobalt or Seadrill and wish to discuss your situation and the potential for the recovery of your investment losses, please contact my law firm for a confidential, no cost consultation: toll-free at: 800-760-0912 or e-mail at: email@example.com.