Scope of Expert Services in Prime and Equity Finance Disputes
Our independent experts provide analysis and support in disputes involving prime brokers, equity finance desks, hedge funds, and investors. We evaluate margin frameworks, financing structures, collateral management, risks, supervision and governance, to determine what was agreed, what was known, and what was done, what fits regulations and industry standards. For complex disputes, we reconstruct decision paths from communications, risk assessments, margin, financing, trade records, and the intimate knowledge of participants and practices.
Our work typically relies on:- Prime brokerage agreements and margin annexes
- Stock lending and securities financing arrangements
- Collateral management and margin call procedures
- Deep knowledge of margin regulations, capital requirements and collateral management
- Examination of risk escalation and supervision practices
- Review of portfolio risk analysis: stress tests, concentration analysis
- Representations made by/to managers or investors
How We Assist: Our Approach to Prime Brokerage and Equity Finance Analysis
- Review of governing agreements and annexes
- Reconstruction of events, margins, collateral, and financing flows
- Review of contemporaneous risk reporting and limit monitoring
- Assessment of supervision and escalation procedures
- Comparison against accepted market practice at the time
Recognized Financial Markets Expert Witness
- Awarded Best Financial Markets Expert Witness Specialists – USA
- All our experts have decades of experience in trading, portfolio management, risk, and financial markets
- Former senior roles at global banks and quantitative investment firms
- Testimony, arbitration, and complex commercial litigation experience
- Analysis built for deposition durability and cross-examination
Questions Commonly Examined in Our Analysis
- Were representations accurate on both sides of the relationship?
- Were risks properly assessed initially, reviewed regularly, and margins applied correctly?
- Were the financing rates, haircuts, and risk limits appropriate for the portfolio in the given environment?
- Were the margin methodologies consistent with contractual terms, regulations, and industry standards?
- Did the prime broker exercise discretion? Was it consistent with industry standards?
- Were events foreseeable based on available risk data?
- Did internal communications accurately reflect the risks and the events?
- Were escalation decisions appropriate? Who knew what and when?
- Could the losses have been mitigated?
- Were the losses due to inappropriate procedures or decisions?
Representative Matters
Hedge Fund v. Global Prime Broker
Matter type: Court litigation
Facts:A discretionary/event arbitrage hedge fund operating a concentrated long–short equity was
forced into liquidation by its prime broker in a period of market stress. The fund alleged that the
increased margin requirements were unnecessary and contrary to onboarding agreements. The
prime broker asserted contractual rights and commercial reason under the prevailing market
conditions.
Core Questions:
onboarding process & disclosures, risk assessment, margin and margin
methodology, monitoring, escalation, appropriateness of decision, allocation of responsibilities
Our work: we performed a deep review of the on-boarding process, margin methodology, risk
monitoring, risk governance, escalation procedures and senior management decisions.
- On-boarding: our industry expert assessed all initial communications, risk disclosures, risk assessments, as well as broker’s choice of margin methodology, in comparison to the contractual agreements.
- Risk monitoring: we assess the monitoring process and governance, the numerical risk assessments against the possible methodologies.
- Chronology: we compared the timings of market events, risk assessment, margin requirements and their likely impact on the fund’s profitability.
- Escalation: we reviewed how and when the prime broker detected problems, escalated issues, and the senior management assessed the situation and managed the risk/margin process.
- Decisions: we assessed if the decisions were consistent with industry standards, if/how they influenced the fund’s positions & profitability, the appropriateness of the margin demands and, ultimately, the decision to force the fund into liquidatio
Analysis:
The expert’s research highlighted the prime broker’s errors in assessing the fund’s strategy during onboarding. The prime’s choice of margin methodology would have been appropriate if it had been able to calculate them properly. Instead, due to technical glitches, the broker replaced it with another methodology, without disclosure. Unnecessary margins were imposed as a result, forcing the reduction of positions at the wrong timing and amplifying losses in a snowballing process.
Outcome:
The expert’s report demonstrated that the decision to force the fund into liquidation was due to the prime’s mismanagement of risks, methodologies, inappropriate escalation and a cascade of erroneous decisions. It strongly supported the plaintiff’s views of the facts.
Camelot v. Main Global Banks
Matter type: Court litigation (prominent).
Facts: Archegos was a heavy investor in Viacom, pushing its price up. When investment bankers announced a secondary issuance, the telecom stock fell a bit, impacting Archegos’ financials. Prime
brokers asked the fund for additional margins, which it was unable to provide. The same few global banks were both the investment bankers taking investor’s firm bids in Viacom shares and the fund’s prime brokers. The departments didn’t know of each other’s activities. The top management, once informed, had to choose. The bankers had to pursue the bidding for legal reasons and prevent the
prime brokers from liquidating shares, but that would have created large losses in prime. The prime brokers needed to liquidate Archegos stock positions to limit their losses, but that would
hurt stock investors. The banks eventually protected their interests. Prime brokers liquidated Archegos, hurting stock investors. Camelot, a Viacom investor, sued the banks to recover its losses
in the stock issuance.
Core Questions:
timing of events, which departments – at each firm – understood what and when,
industry standard in risk management in Prime.
Our work: After researching and finding the fund’s trading positions, we conducted an independent analysis focused on:
- Chronological assessments: we guided the discovery and the review of all internal emails at each of the prime brokers, to assess how information transfer was physically documented. Not all banks disclosed.
- Insider knowledge: our expert had personal working relationships with each key individual at each of the prime brokers. Based on their management styles, industry practices, regulations and the business models at each of the banks, he reconstructed the exact timing of the information dissemination up and down the chains of command at each of the banks
- Cooperation. Our expert communicated with attorneys, who also had experts working on investment bank actions and roles.
Outcome:
We provided a detailed chronology of events at each of the prime sides, highlight if the bank were (un)able or (un)willing to protect the stock investors, and if/how they breached investment banks standards and securities laws.
Related articles:
- The Other High-Stake Archegos case: Link to blog post.
Litigation Deliverables for Prime & Equity Finance Disputes
Risk Narratives
Complex strategies, trading positions, market context, risks, disclosures, margins, regulations, monitoring, governance, liquidations
Management of capital
Risks, costs, regulations, margins, collateral management, weighted assets, stock loans, agreements, leverage
Chronologies
Market events, trading losses, decisions, chronologies and responsibilities, in unique and complex environments.
Insider knowledge
Intimate knowledge of margin regulations, of capital costs, or regulations, of key deciders, of the intimate working at each secretive prime brokerage activities.
Hedge funds
Investor relations, capital raising, stock lending & borrowing, agreements, funding, leverage, strategies, personalities and individuals.
Why Choose Navesink International
Senior practitioner-led analysis
Every case is handled by senior industry professionals, with deep knowledge of all related issues, and is never delegated to junior staff.
Deep technical expertise
Deep experience across all products, strategies, styles, capital, and participants, from the most senior industry practitioners.
Litigation-ready work product
High-quality work product, designed to hold up under cross - examination with clear, insider, and rich content.
Attorney-focused collaboration
Attorney-focused communication and collaboration throughout the engagement, with dedicated and highly efficient professionals.
Discuss Your Prime Brokerage or Equity Finance Matter
If you are evaluating a dispute involving margin, securities financing, stock lending, or prime
brokerage supervision, we provide independent expert analysis grounded in real market practice
FAQs
1. What makes prime brokerage disputes complex?
Prime brokerage disputes are high-stakes litigations between global banks, hedge funds, and their
investors. They relate to unique topics in financial markets, including risk, supervision and
governance, margining and collateral management, funding and leverage, stock lending, custody,
cross-border tax, and the management of many other services. The industry standards and
regulatory requirements are also unique to this rarely visible part of the financial industry