In a private placement security offering, David Lerner Associates, Inc. offered Energy 11, an unlisted limited partnership, to accredited investors. Energy 11 has its money in the energy industry, which has been a wild card in recent years. The most cautious or retired investors should avoid it.
On and offshore, Energy 11 invested in oil and gas properties in the United States. That’s right; Energy 11 decided to bet on leaseholds that weren’t producing anything to start generating income.
As of March 2020, Energy 11 owes its limited partners around $36 million in dividends that were not paid during the past 18 months.
David Lerner Associates received 6% in selling commissions
The Energy 11 fund is a proprietary investment that has not yet been listed on the public market. As such, it is illiquid and subject to turbulence in the energy arena. It is also expensive, and the David Lerner Associates received 6% selling commissions for selling the units. In addition to the selling commissions, they were also entitled to receive contingent incentive fees based on the gross proceeds from sales of the units.
David Lerner Associates is now being investigated for allegations of wrongful behavior and negligent selling. A customer has filed a complaint against the broker and the company for failing to disclose information about Energy 11 and other investments. The investor has also filed a FINRA arbitration claim against the firm. He is seeking $250,000 in damages on the basis of misrepresentations and omissions, as well as breach of fiduciary duty.
The FINRA is investigating Lerner’s conduct in seven other customer-initiated investment disputes. Among these cases, a customer filed a claim for compensatory damages, alleging that the stockbroker failed to properly supervise the activities of his salespersons. The customer also claimed that Lerner and his company failed to disclose information regarding mutual funds.
Managing Dealers receive Dealer Manager Incentive Fees
Energy 11 pays Dealer Manager Incentive Fees to Managing Dealers to promote and develop the company’s products and services. The Dealer Manager is not a partner or joint venture, but agrees to act in this capacity based on representations, warranties, and agreements made by the Company.
Unsuitable sales of oil and gas private placements
The Energy 11 fund was formed to provide investors with the opportunity to invest in oil and gas properties in the onshore United States. Its goals include the acquisition of producing and non-producing properties, and the enhancement of value through development activities. After five to seven years, the fund plans to engage in a liquidity transaction, where it will sell off its properties and distribute the net sales proceeds to its investors. Alternatively, the fund may merge with another entity or list common units on a national securities exchange.
Energy 11 is the subject of numerous investor complaints, including those that focus on the distribution of distributions. Since the funds are illiquid, non-traded limited partnerships, they are not suitable for investors with modest financial resources, limited risk tolerance, or liquidity needs. Additionally, investors have claimed that David Lerner Associates misrepresented the material risks associated with investing in these high-fee, illiquid, and concentrated products.
Private placements in energy are notoriously risky investments. As a result, investors have to be very cautious before investing in them. The securities regulators have identified oil and gas private placements as one of the Top Investor Threats. This is largely due to the fact that these investments are difficult to withdraw money from and may be fraudulent. Investors should research oil and gas private placements on the SEC’s website before making an investment. Additionally, issuers of these offerings are required to file a Form D with the SEC.
Impacts of climatic change on energy 11
One of the human systems most exposed to climate change is energy use. Rising ambient temperatures are expected to increase the demand for cooling during hot seasons, and decrease the demand for heating during cold seasons. They could also increase irrigation requirements during crop-growing seasons. But these predictions are subject to uncertainty, and the effects will vary depending on the level of socioeconomic development and population growth.
Under SSP2 and SSP3, the energy demand in regions with large numbers of lower-middle-income populations will increase significantly. This would require new infrastructure investments to meet the demand. Additionally, climate change will alter the availability of water and resources for energy production and fuel extraction. Sea level rise and the more frequent and intense storms could disrupt energy production and delivery.
In the United States, a recent survey found that the majority of adults believe that the impacts of climate change in their local communities are a major problem. More than half of people living near a coastline said the rise of sea levels was a significant impact. Other major effects of climate change include more frequent wildfires and severe weather.