The Hedge Fund Law Report

The definitive source of actionable intelligence on hedge fund law and regulation

Articles By Topic

By Topic: Loss Causation

  • From Vol. 6 No.37 (Sep. 26, 2013)

    How Can a Hedge Fund That Suffers Losses from Investments in Collateralized Debt Obligations Prove Loss Causation in a Civil Suit?

    On September 3, 2013, the U.S. District Court for the Southern District of New York (Court) dismissed a case brought by Banc of America Securities LLC and Bank of America (BOA) against Bear Stearns Asset Management (BSAM) and others.  The plaintiffs claimed that they suffered billions of dollars in losses caused by a fraud perpetrated by BSAM and three of its former directors.  The fraud related to a “CDO squared” investment, a collateralized debt obligation (CDO) comprised of CDOs constructed out of mortgage-backed securities taken from two of BSAM’s funds.  See “U.S. District Court Approves SEC’s Settlement with Bear Stearns Fund Managers Cioffi and Tannin,” The Hedge Fund Law Report, Vol. 5, No. 26 (Jun. 28, 2012).  The Court’s analysis sheds light on an important issue that investors may face: How can a plaintiff similarly situated to BOA – for instance, a hedge fund that invested in CDOs, CLOs or other structured products – prove loss causation in a civil suit following investment losses?  What is the legal standard applied to expert testimony in such a context?  This article addresses these questions by summarizing the factual background of the case and the Court’s legal analysis.

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  • From Vol. 4 No.19 (Jun. 8, 2011)

    The Supreme Court Rejects Loss Causation Requirement at Class Certification Stage

    On June 6, 2011, in Erica P. John Fund, Inc. v. Halliburton Co., the Supreme Court unanimously held that private securities fraud plaintiffs do not need to prove loss causation in order to obtain class certification.  The high court drew a firm line between two separate elements of a private securities fraud claim: (1) reliance on alleged misrepresentations or omissions, and (2) loss causation.  In a guest article, Jonathan K. Youngwood and Joseph M. McLaughlin, litigation partners with Simpson Thacher & Bartlett LLP in New York, discuss the factual and procedural background of the decision, the Supreme Court’s legal analysis and the implications of the decision for private securities fraud litigation.

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