Securities Lending Litigation
In securities lending – typically undertaken by large institutions such as pension funds, insurance companies, mutual funds, and endowments – securities are transferred from the lender to a borrower in exchange for collateral that in turn is invested on behalf of the lender.
Securities lending has attracted much attention in the current economic crisis as investment returns on both the underlying instruments and some collateral investments have declined. The collateral investments may have included investments in Structured Investment Vehicles (SIVs), Asset Backed Commercial Paper (ABCP), or other similar instruments. Allegations of imprudent investing, breach of contract, and breach of fiduciary duty often follow. Some securities lending lawsuits are ERISA-related, involving 401(k) and other pension plans.
Key issues we would address in securities lending litigations include:
- Were investment guidelines followed properly?
- Were the investments reasonable given the investment guidelines and the risk profile of the participants?
- What explains the decline in the investment returns of the collateral pools (loss causation)?
- How would collateral investments have performed if the funds were invested in different financial instruments?
- What is an appropriate benchmark with which to measure damages?
Although securities lending matters often have complex characteristics, investment suitability and damages calculations are at the heart of these matters. Analysis Group has ample experience in suitability assessments and damages calculations.
We work with leading academics such as Laura Starks, Steve Mann, John Chalmers, and Peter Tufano who are at the forefront of research on investment suitability issues and have authored expert reports and delivered expert deposition, trial, and public hearing testimony in related matters. We have worked with academic experts who have published leading research on securities lending. Many of our academic experts are the leading authorities in structured finance.
In addition, we are affiliated with industry experts such as Patricia Chadwick and John Peavy, experienced asset managers who understand the underlying risks associated with securities lending.
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