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Our law firm has been retained by investors who sustained losses in Shale Royalties sold to them by their brokerage firm, and is preparing to file securities arbitration claims with the Financial Industry Regulatory Authority (“FINRA”) on their behalf. We are also investigating the sales practices and due diligence of other FINRA brokerage firms who solicited customers to purchase Provident Royalties and/or Shale Royalties investments.
In July 2009, the Securities and Exchange Commission (“SEC”) filed fraud charges against Provident Royalties, LLC, in connection with the sale of $485 million in preferred stock and limited partnership offerings in gas and oil deals to at least 7,700 investors. The SEC’s Complaint named Paul R. Melbye, Brendan Coughlin and Henry Harrison, all founders and managers of Provident Royalties, as defendants, as well as brokerage firm Provident Asset Management, LLC and 21 affiliates that offered and sold securities. These affiliates include several Shale Royalties corporations.
According to Ken Israel, Director of the SEC’s Salt Lake Regional Office, “Provident sold ostensibly safe securities such as preferred stock to thousands of investors. But it was actually operating a Ponzi-like shell game in which assets were shuttled from one entity to another and investors were paid ‘returns’ from whatever money was available — usually that of the most recent investors.”
The SEC also noted that “Provident’s entities made some direct retail sales of securities, but primarily solicited retail broker-dealers to enter into placement agreements for each offering, and those retail broker-dealers sold the stock to retail investors nationwide.” Under NASD Rules, brokerage firms have an obligation to make suitable recommendations to their customers and to conduct adequate due diligence into the investment. However, many brokerage firms failed to perform adequate due diligence before recommending Provident Royalties and/or Shale Royalties to their customers. As a result, numerous investors have sustained significant economic damages.