Master Limited Partnership Losses

MLP Investment Loss Recovery | Securities Fraud Attorneys

Experienced Counsel for MLP Investment Loss Claims

A master limited partnership (MLP) is a publicly traded limited partnership listed on a national securities exchange. MLPs have two types of partners: general partners who manage daily operations and limited partners who provide investment capital. While MLPs were historically concentrated in the energy and natural resources sectors, they expanded into other industries, often carrying risks that were not adequately disclosed to investors.

MLPs have complex structures, tax implications, and liquidity constraints that make them unsuitable for many retail investors, particularly retirees and those with conservative risk tolerances. Despite these risks, many brokers and brokerage firms aggressively recommended MLPs to investors who should never have been placed in such volatile holdings.

The securities fraud lawyers at The Frankowski Firm represent investors nationwide who suffered losses after brokers and brokerage firms recommended unsuitable MLP investments. We pursue claims through FINRA arbitration and court proceedings to hold financial advisors and their firms accountable when their negligence causes harm.

What Are the Risks of MLP Investments?

Brokers and financial advisors often promoted MLPs as high-yield, low-risk securities. In reality, many MLPs carried significant risks that were not properly disclosed to investors. Common risks include:

Extreme volatility: MLP unit prices can swing dramatically, especially when tied to commodity prices like oil and natural gas.
Illiquidity: Many MLPs are difficult to sell quickly, trapping investors in declining positions.
High commissions and fees: MLPs often paid brokers generous commissions, creating a conflict of interest that incentivized sales over suitability.
Complex tax consequences: MLP investors receive K-1 tax forms and may face unrelated business taxable income (UBTI), which can create unexpected tax liabilities for IRA and retirement account holders.
Concentration risk: Many energy-focused MLPs suffered catastrophic losses during oil price downturns, devastating portfolios that were overconcentrated in these investments.
Distribution cuts: MLPs that cut or suspended distributions often saw their unit prices collapse, compounding investor losses.

Why Brokers Are Liable for MLP Losses

Under FINRA rules, brokers and brokerage firms have an affirmative duty to recommend only investments that are suitable for each individual investor. This suitability obligation requires advisors to consider factors including:

The investor’s age and retirement timeline
Risk tolerance and investment objectives
Liquid net worth and income needs
Overall portfolio concentration
Tax situation and account type

When brokers recommend MLPs to investors for whom they are unsuitable, or when they fail to disclose material risks such as illiquidity, volatility, or complex tax consequences, they violate their duty of care. Additionally, brokerage firms that fail to supervise their brokers’ MLP recommendations can be held liable for resulting losses.

Common legal claims in MLP loss recovery cases include:

Unsuitability: Recommending MLPs to investors with conservative or moderate risk profiles
Misrepresentation: Characterizing MLPs as safe, guaranteed, or low-risk
Failure to disclose: Omitting material information about risks, fees, or conflicts of interest
Failure to supervise: Brokerage firms failing to monitor broker MLP recommendations
Overconcentration: Placing too large a percentage of a portfolio in MLP investments

How to Recover MLP Investment Losses

If you suffered losses from an MLP investment that was recommended by your broker or financial advisor, you may be entitled to recover your damages. The primary avenue for recovery is FINRA arbitration, a streamlined dispute resolution process specifically designed for investor claims against broker-dealers.

FINRA arbitration offers several advantages over traditional litigation:

Faster resolution: Most cases are resolved within 12 to 18 months
Lower costs: Arbitration typically costs less than filing a lawsuit in court
Industry expertise: Arbitration panels include members with securities industry knowledge
Binding results: Awards are enforceable in court

The Frankowski Firm has extensive experience representing investors in FINRA arbitration proceedings involving MLP losses. We examine whether a proper suitability analysis was conducted, evaluate the merits and risks of the specific MLP investment, and identify what more suitable alternatives were available. Our attorneys work on a contingency basis, meaning you pay no fees unless we recover compensation for your losses.

Frequently Asked Questions About MLP Losses

What is a master limited partnership (MLP)?

A master limited partnership is a publicly traded limited partnership that combines the tax benefits of a partnership with the liquidity of a publicly traded security. MLPs are typically found in the energy, natural resources, and real estate sectors. They are managed by general partners while limited partners provide investment capital and receive distributions.

How do I know if my MLP investment was unsuitable?

An MLP investment may have been unsuitable if your broker recommended it despite your conservative risk tolerance, need for liquidity, retirement timeline, or if it created overconcentration in a single asset class. If your financial advisor failed to explain the risks of illiquidity, volatility, tax complexity, or potential distribution cuts, you may have a valid claim.

What is the deadline to file a FINRA arbitration claim for MLP losses?

FINRA rules generally require that claims be filed within six years of the event giving rise to the dispute. However, applicable state statutes of limitations may impose shorter deadlines. It is important to consult with a securities attorney promptly to preserve your legal rights.

Can I recover MLP losses if the investment was in my retirement account?

Yes. Many investors held MLPs in IRAs and other retirement accounts, often without being warned about the UBTI tax consequences or the unsuitability of placing volatile, illiquid investments in accounts intended for retirement security. These claims can be pursued through FINRA arbitration.

What types of damages can I recover?

Investors may recover compensatory damages including the difference between the amount invested and the current value, lost opportunity costs (what a suitable investment would have earned), and in some cases, attorneys’ fees, interest, and punitive damages for egregious misconduct.

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Hold Brokers Accountable for Unsuitable MLP Recommendations

If your MLP investment caused significant losses, you deserve answers and may be entitled to compensation. The securities fraud attorneys at The Frankowski Firm have the experience and resources to investigate your claim, identify broker misconduct, and fight for the recovery you deserve. Call 888-741-7503 for a free, confidential consultation, or complete our contact form to get started today.