MLP Fraud Attorney
Master Limited Partnerships promised steady income and attractive yields. Instead, many investors watched their retirement savings disappear as the Alerian MLP Index plunged more than 70% from its 2015 peak. If your financial advisor recommended MLPs without properly disclosing the risks, you may have a valid claim for recovery.
At Varnavides Law, we represent investors who suffered losses from unsuitable MLP investments, misrepresentation, and broker misconduct. With 10 years of experience defending broker-dealers, Gary Varnavides now uses that insider knowledge to fight for investors harmed by the very tactics he once witnessed from the other side.
Key Takeaways
- The MLP market experienced catastrophic losses, with the Alerian MLP Index dropping over 70% from 2015 to 2020
- Many MLPs were unsuitably sold as “bond substitutes” to conservative investors seeking income
- FINRA arbitration resolves 84% of investor claims through settlement or awarded damages
- Strict time limits apply to investment fraud claims, making prompt action essential
- Gary Varnavides spent 10 years defending broker-dealers, giving him unique insight into defense strategies
What Are Master Limited Partnerships?
Master Limited Partnerships are publicly traded investment vehicles that combine the tax benefits of a limited partnership with the liquidity of exchange-traded securities. Most MLPs operate in the energy sector, owning infrastructure such as oil and gas pipelines, storage facilities, and processing plants.
The MLP structure includes two types of partners. Limited partners provide investment capital and receive quarterly distributions. General partners manage daily operations and receive compensation tied to performance.
Market Context: According to the SEC’s investor bulletin on MLPs, approximately 86% of the $490 billion MLP securities market is concentrated in energy and natural resources. Industry consolidation has reduced the number of publicly traded MLPs from over 130 to fewer than 40 as of late 2025.
Why MLP Investments Caused Massive Losses
Financial advisors frequently marketed MLPs as safe income investments comparable to bonds. This sales pitch proved dangerously misleading. Unlike bonds, MLPs are equity investments with direct exposure to commodity price volatility.
The energy sector collapse beginning in 2014 devastated MLP values. Crude oil prices dropped 62% from $110.62 per barrel in September 2014 to $42.24 by November 2015. MLP prices followed, with many investors losing 50% to 80% of their investment.
The Toll Road Myth
Brokers often described midstream MLPs as “energy toll roads” that would generate stable fee income regardless of commodity prices. This representation was misleading. When oil and gas producers experienced financial distress, many could not honor their contracts with pipeline MLPs. Some renegotiated terms, others defaulted, and several filed for bankruptcy.
| Time Period | MLP Market Performance | Contributing Factor |
|---|---|---|
| 2015-2020 | Alerian MLP Index down 70%+ | Oil price collapse, oversupply |
| 2008 | AMZ MLP Index down 36.9% | Financial crisis, commodity crash |
| 1981-1995 | Trailed market by 13%+ annually | Extended energy sector weakness |
Common Types of MLP Fraud and Misconduct
If you suffered MLP losses, your broker or financial advisor may have violated securities laws and FINRA rules. Our firm investigates the following types of broker misconduct:
Unsuitable Recommendations
FINRA Rule 2111 requires that investment recommendations be suitable for each client based on their age, risk tolerance, investment objectives, and financial situation. Recommending volatile MLPs to conservative investors seeking income may constitute a suitability violation.
Overconcentration
Placing too much of an investor’s portfolio in MLPs or the energy sector violates diversification principles. Concentrated exposure to a single volatile industry significantly increases risk without corresponding benefit.
Misrepresentation
Marketing MLPs as “bond substitutes” or claiming they are uncorrelated with oil prices constitutes misrepresentation when the opposite is true. Brokers have an obligation to provide accurate information about investment risks.
Failure to Disclose Risks
Financial advisors must disclose material risks including commodity price sensitivity, distribution cut potential, leverage concerns, and complex tax consequences such as phantom income liability.
Hidden MLP Risks Your Broker May Not Have Disclosed
Beyond the obvious market risks, MLPs carry several complex risks that brokers frequently failed to explain to investors.
Commodity Price Sensitivity
Despite marketing claims, MLPs are highly correlated with oil and gas prices. When commodity prices decline, MLP values typically follow, regardless of the fee-based revenue model.
Distribution Cuts
Since 2014, many MLPs have reduced or completely suspended their quarterly distributions. Investors who purchased MLPs specifically for income found themselves without the cash flow they expected while also suffering principal losses.
Complex Tax Consequences
MLP investors receive K-1 tax forms rather than 1099s, complicating tax preparation. More problematically, if an MLP restructures debt or files for bankruptcy, investors may owe taxes on “phantom income” they never actually received.
Tax Alert: MLP bankruptcy or debt restructuring can trigger phantom income tax liability. Investors may be required to pay taxes on income they never received, compounding their investment losses.
Leverage Risk
MLPs typically carry high debt-to-capital ratios to fund infrastructure investments. This leverage amplifies both gains and losses, increasing volatility beyond what many investors anticipated.
Liquidity Concerns
During market stress, some MLPs became difficult to sell at fair prices. Investors who needed to exit their positions sometimes faced significant bid-ask spreads or were unable to find buyers.
The FINRA Arbitration Process for MLP Claims
Most FINRA arbitration cases involving MLP losses resolve through settlement or result in awarded damages. Understanding the process helps investors make informed decisions about pursuing claims.
Filing Your Claim
FINRA arbitration begins with filing a Statement of Claim describing the misconduct and damages. The respondent brokerage firm must answer within 45 days. Cases are assigned to a panel of arbitrators who will hear evidence and render a binding decision.
Resolution Statistics
According to FINRA’s 2024 Dispute Resolution Statistics, 84% of customer arbitration cases closed through settlement or paid damages. Mediation achieved an 87% settlement rate, improving from 85% in 2023. The average case duration decreased to 12.5 months from 14.6 months the prior year.
84%
Customer cases resolved through settlement or damages award (2024)
87%
Mediation settlement rate (2024)
12.5 Months
Average case duration (2024)
Damages You May Recover
Investors who prevail in MLP fraud claims may recover several categories of damages:
- Investment Losses: The difference between what you invested and what you received back, including lost distributions
- Consequential Damages: Additional losses caused by the misconduct, such as tax penalties or margin interest
- Interest: Pre-judgment interest from the date of the wrongful conduct
- Attorney Fees: In some cases, arbitration panels award recovery of legal costs
Why Gary Varnavides Is Different: The Insider Advantage
Most investment fraud attorneys have only represented investors. Gary Varnavides spent 10 years at Sichenzia Ross Ference LLP defending the very broker-dealers and financial advisors who face claims like yours.
What This Means for Your Case
Having defended brokerage firms for a decade, Gary understands the tactics, arguments, and strategies the other side will use against you. He knows what evidence matters most, which defenses are strong or weak, and how to anticipate opposing counsel’s moves.
Defense Tactics We Anticipate
- Claims you authorized all MLP purchases
- Arguments that you were a sophisticated investor
- Assertions that market conditions caused losses
- Attempts to blame you for not reading disclosures
How We Counter These Defenses
- Document the broker’s actual recommendations and rationale
- Demonstrate suitability failures despite investor experience
- Show misconduct occurred before market decline
- Prove disclosures were inadequate or contradicted by oral representations
Time Limits for MLP Fraud Claims
Securities fraud claims are subject to strict time limits. Missing these deadlines can permanently bar your right to recovery, regardless of how strong your case may be.
FINRA Eligibility Rule: FINRA arbitration claims must be filed within six years from the occurrence or event giving rise to the claim. Depending on your specific situation, state securities laws or federal statutes may impose shorter deadlines.
The clock typically begins running from the date of the misconduct or the date you discovered (or should have discovered) the fraud. Because these calculations can be complex, consulting with an MLP fraud attorney promptly protects your rights.
How to Identify MLP Fraud in Your Account
Review your account statements and documents for warning signs of potential misconduct:
| Warning Sign | What It May Indicate |
|---|---|
| MLPs exceeding 10-20% of portfolio | Overconcentration violation |
| Conservative profile with aggressive MLP holdings | Suitability failure |
| Written materials calling MLPs “safe” or “like bonds” | Misrepresentation |
| No discussion of tax implications in notes | Failure to disclose material risks |
| Multiple MLP purchases in short period | Possible churning or overconcentration |
California Advantages for MLP Fraud Claims
Investors in California may benefit from several procedural and substantive advantages when pursuing MLP claims through our securities litigation practice.
California securities laws, including the Corporate Securities Law of 1968, provide robust investor protections. Los Angeles is home to experienced FINRA arbitrators, and filing in California may provide access to more investor-friendly arbitration pools and local arbitrators familiar with energy sector investments popular in the state.
Frequently Asked Questions About MLP Fraud
What is an MLP fraud attorney?
An MLP fraud attorney represents investors who suffered losses from unsuitable, misrepresented, or fraudulently sold Master Limited Partnership investments. These attorneys handle FINRA arbitration claims and securities litigation against brokerage firms and financial advisors who violated their duties to clients.
How do I know if my MLP losses are from fraud versus market conditions?
The key distinction is whether your broker followed proper procedures. If your advisor recommended MLPs that were unsuitable for your risk tolerance, failed to disclose material risks, overconcentrated your portfolio in energy investments, or misrepresented MLPs as safe income investments, you may have a valid claim regardless of general market conditions.
What MLP investments have caused investor losses?
Major MLPs that have resulted in investor losses include Enterprise Products Partners, Energy Transfer Partners, Williams Partners, Magellan Midstream Partners, Enbridge Energy Partners, TC Pipelines, Legacy Reserves, and funds tracking the Alerian MLP Index. This is not an exhaustive list.
How long do I have to file an MLP fraud claim?
FINRA arbitration claims must generally be filed within six years from the event giving rise to the dispute. However, other time limits may apply under state or federal securities laws. Consult an attorney promptly to protect your rights.
What compensation can I recover for MLP losses?
Recoverable damages may include your investment losses, lost distributions, consequential damages such as tax penalties, pre-judgment interest, and in some cases attorney fees. A 2024 FINRA arbitration panel awarded $723,000 to an investor with an overconcentrated MLP portfolio.
Do I have to go to court for an MLP fraud case?
Most MLP fraud claims proceed through FINRA arbitration rather than court. Brokerage account agreements typically require arbitration. This process is often faster than litigation, with FINRA reporting an average case duration of 12.5 months in 2024.
What does it cost to hire an MLP fraud attorney?
We handle most MLP fraud cases on a contingency fee basis, meaning we only collect attorney fees if we recover money for you. There are no upfront legal fees. Case costs and fee percentages are discussed during your free consultation.
Why should I choose Varnavides Law for my MLP case?
Gary Varnavides spent 10 years at Sichenzia Ross Ference LLP defending broker-dealers against investor claims. This insider experience means he knows the defenses, tactics, and strategies the other side will use. He now applies that knowledge to fight for investors. Mr. Varnavides has been recognized as a Super Lawyers Rising Star from 2015-2023 and is licensed in California and New York.
Take Action: Protect Your Right to Recovery
Time limits can permanently bar otherwise valid MLP fraud claims. If you suffered significant losses from Master Limited Partnership investments, taking prompt action protects your legal rights.
Varnavides Law offers free, confidential consultations to review your situation and explain your options. There is no obligation and no cost to learn whether you have a viable claim.
Schedule Your Free MLP Case Evaluation
Gary Varnavides brings a decade of broker-dealer defense experience to fight for investors harmed by MLP fraud and misconduct. Contact us today to discuss your situation.
Request Free ConsultationVarnavides Law, PC represents investors nationwide in FINRA arbitration and securities litigation matters. Licensed in California and New York. Prior results do not guarantee similar outcomes.
