Leveraged hedge fund portfolio broker-customer dispute

Brattle was retained to testify at a FINRA arbitration in relation to a failed leveraged hedge fund investment that was liquidated by the leverage provider following a knockout event during the credit crisis. An individual investor switched from a margin account to use an options contract structure to bet on the performance of a customized portfolio of hedge fund investments. The dispute concerned whether the structure was suitable and whether investors understood its operation and how it differed from a margin account. Testimony was developed in connection with causation and damages on differences in the operation of the option structure compared to a margin account; the effect of limitations on fund selection on performance; and how the knockout event was triggered.