A group of investors represented by Mika Meyers, PLC have filed a complaint against Merrill Lynch alleging that Merrill Lynch advisor, Thomas Braley, unilaterally liquidated their safe, blue-chip investments and used the proceeds to concentrate their accounts in a handful of speculative energy- and industrial-sector stocks and Master Limited Partnerships. One of the accounts belonged to a charitable foundation that was established to help fund Boy Scout camps. The investors specifically allege that the handful of companies that Braley unilaterally selected for their portfolios were all involved in either commodity exploration/production or dry-bulk shipping of commodities, and that this overconcentration of the portfolios in two small areas of the market resulted in substantial losses when the energy-sector and the dry-bulk shipping industry hit the skids in 2014.
The chart below shows how one of the accounts at issue went from a 13% concentration in oil and gas and commodity shipping investments to a 63% concentration in such investments in less than a year. The investments declined more than 70% in value over the short time period they were held. The chart also identifies the stocks that were sold to fund the purchase of the oil and gas and commodity shipping investments, and how the returns on those investments compared to the investments that Braley replaced them with.
|Bought||Industry||NOP||Sold||Industry||NOP + Lost Profits (1)||Energy / Industrial
|Jan. 2014||Seadrill, Ltd ($28,610)||Oil/gas||$26,392||Ford Motor Co.||Auto Mfg.||21,783.87||13%|
|Mar. 2014||Noble Corp, PLC ($18,175)||Oil/gas||$14,270||Eli Lily & Company||Drug Mfg.||19,995.42||32%|
|Mar. 2014||Safe Bulkers, Inc. ($20,252)||Shipping – cmdty||$13,372||Eli Lily & Company||Drug
|July 2014||Golden Ocean Group, Ltd ($25,932)||Shipping – cmdty||$21,708||Telefonica Brasil ADR||Telecom.||11,194.56||48%|
|July 2014||Capital Products Ptnrs ($9,133)||Shipping – cmdty||$4,629||Telefonica Brasil ADR||Telecom.||783.47||48%|
|Oct. 2014||Navios Maritime Ptnrs ($24,970)||Shipping – cmdty||$19,663||Oaktree Capital Group||Asset Mgmt.||18,620.38||56%|
|Nov. 2014||Petroleo Bras SA ADR
|Oil/gas||$7,075||Invesco Int’l Growth Fund||Various||4,686.78||64%|