Securities Litigation and Analytical Support: Case Examples


In analyzing the results from examinations brought by FINRA and the SEC, we have determined the cost impact to clients based on the use of different classes of the same fund. For example, using data arising from an SEC examination, we determined the cost impact to clients—based on net expense ratios—of owning the A or C shares of a particular fund as opposed to the available Institutional shares. In those instances, we calculated the differential in fees, as well as simple interest owed, and assisted our client in making remediation payments back to impacted accounts. Over the years, Bates has also assisted broker-dealers with dozens of retail litigation cases involving share class suitability. Many of these disputes revolve around whether investors should have been invested in class A shares instead of class B and class C shares. To assist our clients, we have modeled account p/(l), sales loads, operating expenses and total cost of ownership (sales loads plus operating expenses) of actual mutual fund positions held (typically B share and C share classes) vs. hypothetical investments of the same fund in a different share class (typically A shares).


Bates has assisted in matters arising from the sale of private placement securities, providing economic analysis of the market for private placements, the reasonableness of fees incurred on such investments, as well as performance comparison hypotheticals against other publicly traded comparable assets. In addition, Bates experts have provided valuable insight on the firm-level due diligence and approval process before allowing a private placement to be sold into client accounts, as well as the compensation to the financial advisor versus the compensation to the firm from selling private placements. The opinions provided by our experts also address the adequacy of disclosures, and representations made by the client purchasing the investment.

Bates has also provided support in matters involving the sale of unregistered securities under Rule 144. This includes requirements for both affiliated and unaffiliated sellers, evaluation of holding period requirements, information filing requirements, non-solicitation of buyers, and volume limitations on the sales. Bates has performed quantitative analyses to determine the likely proceeds from a sale adhering to the volume limitations, and to account for the price impact of slow and consistent selling over time.


Bates staff and experts have provided both consulting and testimony services in matters involving options trading within a client account. Bates experts have opined on the appropriateness of the options trading, as well as the role the options position play within the client’s overall investment strategy and portfolio of holdings. Bates has performed quantitative analyses examining the likelihood that an option position bought or sold by a client will end in a gain or loss, providing a single figure capturing the probability weighted expected value from the purchase or sale of the option position.

Bates experts have also provided in-depth knowledge concerning commonly employed options trading strategies such as covered calls, zero cost collars, and spreads (vertical or calendar). The role of these strategies within an overall investment objective, as well as the relative risks created for the client, are also analyzed. Bates consultants and experts have also provided analysis and testimony in support of matters involving premium generation strategies employed to generate additional yield on a client’s portfolio, such as those involving iron condors, or other means by which the held portfolio serves as collateral for options-related, income-focused trading.


Bates Group has been retained by an investment advisory firm whose customer invested in over 60 Non Traded REITs and alleged the investments were not suitable and generated significant losses. We prepared P/(L) summaries by individual REIT along with damages models comparing the performance of the Non Traded REITs to industry benchmarks and indices. In addition, we have conducted research into various issues involving REITs and their inclusion in portfolios. We were also retained by a broker-dealer to review hundreds of selected REIT transactions at issue and calculated profit/loss as well as restitution calculations using statutory interest rates.


Bates Group has been retained to analyze thousands of Annuity/Life Insurance contracts to determine gains or losses associated with Fixed/Variable/Indexed Annuities as well as Term/Whole Life/Universal Life/Variable Life Insurance products. In addition, Bates has reviewed numerous annuity switches and has developed a “Net Cost to Exchange” model to evaluate the impact of the exchange. We have also prepared hypothetical damages calculation, which have included hypothetical insurance premiums and death benefits discounted to present value, as well as hypothetical fee comparisons across various insurance products and other investment alternatives. In addition, Bates has performed a number of asset and sector allocation analyses for variable annuity and variable life contracts. These analyses have been useful in defending against suitability (concentration) claims and comparing to model portfolio allocations.

Our Insurance Experts have also been retained to consult or testify regarding:

  • Suitability and sales practices of life insurance and annuity products
  • Agent / Broker standard of care
  • Life Insurance underwriting
  • Premium Financing
  • Unauthorized trading / excessive commissions
  • Annuity purchases in qualified plans
  • Liquidity of investment vs. estate planning strategies
  • Tax deferral benefits and taxation of distributions
  • Actuarial evaluation of Annuities and Life Insurance contracts and riders
  • Life insurance and annuity product marketing
  • Agency and branch office management and administration
  • CRD / U5 disclosures and breach of contract
  • Supervision / selling away

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