“The securities industry is unique. For one thing, it is the lifeblood
of our capitalist system, …For another, Congress gave it the
privilege of regulating itself, in the first instance. This is a rare
public trust, bestowed on precious few industries.”
Chairman Harvey Pitt, SEC, Remarks at the SIA
Annual Meeting, 2001
The theories and tools of economics and finance are now accepted and, in fact, expected among the securities bar and also in the courts. The Supreme Court itself endorsed the efficient market theory in Basic v. Levinson, noting that “empirical studies have tended to confirm Congress” premise that the market price of shares traded on well-developed markets reflects all publicly available information, and, hence, any material misrepresentations.
Economics and finance have come to play a central role in securities litigation. The issues that arise in any securities case – particularly materiality, causation, disgorgement, and damages – are fundamentally quantitative economic issues. EI economists are experienced in the application of econometric and other analytical techniques appropriate to the resolution of these issues. EI economists are also skilled in devising innovative means of addressing novel issues and providing fact-based treatments of complicated financial issues. EI economists can and do work with leading finance professors when tackling complex financial and securities cases.
Economic and financial analysis is also in demand as a result of the proliferation of increasingly complex derivative instruments. EI economists are experienced in the application of sophisticated pricing models to derive valuation estimates and have analyzed various features of options, futures, and other derivatives.
Further, EI economists are intimately familiar with regulatory issues in the securities and derivatives markets. This familiarity comes from more than 20 years of experience at the Securities and Exchange Commission (SEC). For example, EI economists have assisted the National Association of Securities Dealers in matters before the SEC and the Department of Justice on issues ranging from the vigor of competition among Nasdaq market makers to the desirability of new order systems to improve pricing to small investors.
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