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Economic Damages Calculations The but for investment portfolio is a tool that damages analysts utilize Portfolio for investors estimate economic damages when there is an allegation of a breach of fiduciary duty with regard to the management of an investment.
In its simplest form, the but for investment portfolio estimates the value of a portfolio but for the alleged breach of fiduciary duty. Case law precedents established the but for investment portfolio analysis as a method to estimate economic damages on a market adjusted basis.
While the concept of a but for investment portfolio analysis is simple, the creation of a but for investment portfolio is typically complex.
The damages analyst constructs the but for investment portfolio to estimate the value of the investment portfolio but for the alleged breach of fiduciary duty.
Economic damages are then calculated by subtracting the ending value of the disputed portfolio i. The but for investment portfolio analysis provides a market adjusted estimate of economic damages designed to make the beneficiary whole. Other methods for estimating damages in an investment portfolio breach of fiduciary duty case include: Fiduciaries in breach of fiduciary duty cases involving an investment portfolio may include, but are not limited to: The fiduciary is typically the defendant in breach of fiduciary duty disputes.
Plaintiffs in breach of fiduciary disputes may include, Portfolio for investors are not limited to: For simplification purposes, this discussion will focus on trustees as fiduciaries or defendants and trust beneficiaries as plaintiffs. The damages analyst often creates multiple but for investment portfolios to estimate a range of hypothetical scenarios, which can be used to estimate a range of economic damages.
The damages analyst typically does not opine on 1 the allegation, 2 causation, or 3 legal aspects of the dispute. The damages analyst typically operates under the assumption that there was a breach of fiduciary duty.
The concept of a but for investment portfolio is relatively straightforward, but the construction of a but for investment portfolio is often complex. There are many variables that can affect the but for investment portfolio damages analysis, such as determining the initial economic damages amount, assessing alternate investment suitability, setting alternate investment asset allocations, establishing rebalancing criteria, and understanding portfolio tax consequences.
The following discussion 1 provides historical precedence for the but for investment portfolio; 2 summarizes common allegations in breach of fiduciary duty disputes; and 3 examines the construction of the but for investment portfolio and the accompanying complexities in its construction.
History The but for investment portfolio is a product of case law. The trial judge must be afforded significant discretion to choose the indicia by which such estimation is to be made, based primarily on the types of securities comprising the portfolio.
Bierwirth litigation involved market adjusted damages and the use of a but for investment portfolio.
Bierwirth, the Secretary of the Department of Labor filed suit against pension plan trustees for the Grumman Corporation Pension Plan, alleging a breach of fiduciary duty for improperly buying Grumman Corporation securities on behalf of the pension plan.
The trustees, who were also executives of Grumman Corporation, acquired Grumman Corporation securities to block a tender offer for a controlling interest made by the LTV Corporation.
The district court dismissed the case, concluding that the pension plan beneficiaries were not damaged due to the gain earned by holding the Grumman Corporation stock. In determining what the Plan would have earned had the funds been available for other Plan purposes, the district court should presume that the funds would have been treated like other funds being invested during the same period in proper transactions.
Breaches of Fiduciary Duty The prudent investor rule is the standard that fiduciaries are held to in 43 states, the District of Columbia, and the U.
A trustee shall invest and manage trust assets as a prudent investor would, by considering the purposes, terms, distribution requirements, and other circumstances of the trust.
In satisfying this standard, the trustee shall exercise reasonable care, skill, and caution. A trustee shall invest and manage the trust assets solely in the interest of the beneficiaries.
SEC Rule 10b-5 deals with fiduciaries trading securities based on misrepresentation and omissions of facts.
ERISA section holds fiduciaries personally liable for a breach of fiduciary duty. There are many ways in which a breach of fiduciary duty can occur. The following is a non-exhaustive list of actions that may result in a breach of fiduciary duty: This discussion will focus on these two issues in the following sections.
In the case of Hatrock v. Fiduciaries often charge several types of fees and expenses in exchange for portfolio management services and expertise. Common types of fees include:Canadians are searching for quality stocks to add to their dividend-focused TFSA portfolios..
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The but for investment portfolio is a tool that damages analysts utilize to estimate economic damages when there is an allegation of a breach of fiduciary duty with regard to the management of an investment.
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