Investor Lawyers Blog
Investors in various oil drilling programs offered by Vista Resources, Inc. (“Vista”), may be able to recover losses sustained on their investment through arbitration before FINRA, in the event that the investment was recommended by a financial advisor who lacked a reasonable basis for the recommendation, or if the nature of the investment — including its risk components — was misrepresented by the advisor and his or her brokerage firm. Founded in 1987, Vista is headquartered in Pittsburgh, PA. Over the course of the past several decades, Vista has managed roughly 60 drilling programs, typically structured as industry joint ventures or limited partnerships.
Included among Vista’s recent programs are: Vista Drilling Program 2011-1, Vista Drilling Program 2012, and Vista Drilling Program 2013-2 (collectively, “Vista Programs”). These Vista Programs are extremely complex and risky investment vehicles, for a number of reasons. To begin, these private oil and gas investments charge very high fees to investors. For example, Vista charges investors an approximate 10% up-front commission. In addition, Vista charges an approximate 12% markup fee on the costs associated with drilling for productive oil reserves. Such high up-front commissions and fees act as an immediate “drag” on the initial investment, and present significant risk to the uninformed retail investor.
Further, these Vista Programs are allowed to use up to 20% of investor capital to drill speculative exploratory wells. A broker recommending such an investment has a duty to inform the investor of such risks, and of the capital-intensive and speculative nature of oil drilling as an investment. Moreover, the brokerage firm — and by extension, the broker — recommending such an investment, have a duty to first conduct due diligence on the investment.
As a commodity, the price movement of oil has historically been very volatile (boom and bust cycles are typical), and accordingly, many illiquid oil and gas investments such as the Vista Programs are not suitable for ordinary investors. Ultimately, the financial advisor and his or her firm have an affirmative duty to determine if the investment is suitable for the investor, pursuant to FINRA Rule 2111, in light of the investor’s profile and stated investment objectives. In instances where an investor’s account becomes over-concentrated in oil and gas investments, or a broker fails to disclose the risks associated with such an investment or investment strategy, the broker and his or her firm may be liable for losses sustained.
Investors with questions about a possible claim concerning investments in any of the Vista Programs, or other oil and gas related investments, may contact Law Office of Christopher J. Gray, P.C. at (866) 966-9598 or newcases@investorlawyers.net for a no-cost, confidential consultation.