Accurate forensic accounting is critical to the success of most securities litigation. Securities Litigation Support, LLC can prepare the required forensic accounting reports and well managed portfolio damage calculations either directly or in conjunction with one of our strategic accounting partners.
When our strategic accounting partners prepare the reports, they are produced under our direction and are private labeled with our logo. Since we directed the preparation of these private labeled reports, Greg Wood can testify to them in court or arbitration. There is no need to hire a second accounting expert.Contact Greg Wood to discuss your forensic accounting needs.
Each side in a securities litigation matter is challenged by presenting a complete, accurate and compelling assessment of what happened. Opinions and perspectives often differ, memories fade, documents are lost and expert opinions vary. Though every witness testifies under oath, many have differing recollections and perspectives. During the testimony the trier of fact methodically wades through this swamp of information searching for the truth.
The exhibit books from each side frequently contain the periodic brokerage statements. These are usually identical documents with different Bates number series. I am not aware of a situation where the accuracy of these documents is questioned. Often, counsel will, for simplicity, examine a witness using the other side’s monthly statement documents.
Brokerage statements, though invaluable in pinpointing what happened, are limited when it comes to analyzing or presenting the “big picture” or totals in a securities case. These statements are chronological documents that contain more chronologically organized information. Most who read them page-by-page get lost in the detail.
The best approach in a securities litigation matter is to use forensic accounting reports to enhance the usefulness of the brokerage statements. The information sources for these forensic accounting reports are monthly statements that are accepted by and used by both sides.
Line-by-line and item-by-item, the transactions from the monthly statements are entered into sophisticated and specialized software. Once the data is entered the information can be filtered, arranged and sorted into detail and summary reports that present an accurate and focused representation of the account activities over time. Each report covers a specific segment of the transactions. The accuracy of these reports is “to the penny.”
A common forensic accounting library would contain the following standard Individual reports:
Internal Rate of Return
Shows the annualized rate at which the account gained or lost money using net present value discounting.
Total Investment Summary
Displays a reconciliation of all activity in the account. The left side of the report shows all client-based activity. The right side of the report shows activity that is a result of actual investment activity.
Trade Transaction Summary
Trade gain/loss summarized by issue type (securities, bonds, mutual funds, etc.).
Trade Transaction Detail Summary
Trade gain/loss per individual investment, grouped by issue type.
Trade Transaction Return on Investment (ROI)
Investment activity by issue, showing all transaction detail, trade gain/loss, income and net ROI.
Schedule showing trade matches on a first-in/first-out basis, with net trading result and days held.
All cash transactions grouped by type (deposits, withdrawals, income, etc.).
Chronological listing of all trade transactions showing commission amount per transaction.
Chronological listing of all cash transactions.
Shows all income grouped by investment.
Lists monthly cash flow and monthly and cumulative profit/loss.
Schedule showing monthly market values, cash balances and equity values, with annual purchases and turnover by market and equity values, as well as average annualized turnover by market and equity value.
Cost Maintenance Factor (CMF)
Summarizes commissions, fees and interest charges by month. Also summarizes annualized commission and total cost ratios, based on both total equity and market values.
Cumulative P&L Graph
Cumulative P&L as shown in the Monthly Profit & Loss report, graphed over the life of the account.
Monthly account equity graphed over the life of the account.
Once the data is entered into the software, in addition to the standard reports, a large number of custom reports can be created. These custom reports explain and enhance the information of interest. Custom reports can be prepared that join outside information, such as market data, with the statement entries. The most common of the custom reports is the Market Adjusted Damages report. This report adjusts out-of-pocket loss numbers upwards or downwards for changes in the actual securities markets. The user selects the index of mutual funds that are the baseline for that adjustment.
Other custom reports include Sector or Concentration Analysis reports. These documents look at the portfolio over time and show the shifts in sectors or the securities concentrations present. Many times these reports are included in suitability cases.
These standard and custom reports enhance the information from the monthly statements. They can give the side preparing them a communications and understanding advantage. Securities Litigation Support, LLC can help you get the best forensic accounting reports for your matter. We add value by using our experience helping our clients focus on the style and complexity of the reports prepared. We are experienced in giving forensic accounting report testimony.
Securities Litigation Support prepares specialized analysis related to complex products such as variable annuities. Further, we have close working relationships with several forensic accounting firms. In those cases where the client’s needs are best served by another forensic accountant we stand ready to coordinate the job for you.