Portfolio Monitoring – What It Is and What It Does for Your Institution

Portfolio monitoring is the regular monitoring of an institution’s securities holdings by qualified securities legal counsel.  The service allows Robbins Geller to quickly identify large losses suffered by its clients due to corporate fraud or misconduct so that clients can carefully and deliberately weigh their options.  The Portfolio Monitoring ProgramSM is a non-intrusive, free service that gets the Firm’s clients important information quickly.  Many reports and studies have demonstrated that pension funds benefit from free portfolio monitoring services.

Make Sure Your Data Is Secure

A portfolio monitoring program should include the electronic transfer of trading data to a secure server, accessible only to select individuals at legal counsel’s office.  The program’s technical features should include physical security, network security and operating security.  These include limiting access to the data to secure lines, such as a 128-bit encrypted fixed-line connection.  In addition, the data storage should have an intrusion protection system operating 24 hours a day, which prevents unauthorized access.  The use of packet and host-based firewalls not only protects the data from internet intrusion, but also periodically “tests” the firewall capabilities of the server.

Immediate Calculation of Losses

Once an institution is satisfied with the safety of the data storage system, appropriate transactional data should be transferred to the server.  A monitoring system should be able to provide institution trustees or their designees with a real-time calculation of the institution’s losses.  With portfolio monitoring, the calculation of the institution’s losses is done automatically, and the only contact with the institution is when the information is conveyed to the institution.  This information is key to many institutions who want to know how they have been affected by a securities fraud, such as that which occurred at Enron or Parmalat.

Monthly Monitoring Reports

A monitoring service should provide an institution with frequent reports of all institution losses in securities class actions filed and published in that time frame.  This provides the institution with a record of cases in which the institution has a loss so that a more thorough and efficient filing of claims can be accomplished.  The report should provide not only the losses suffered by the institution in each case filed, but also a brief synopsis and analysis of each case filed.

Interim Reporting

In addition to frequent reporting, a monitoring program should also provide interim information to an institution, based upon the institution’s pre-set thresholds.  For example, certain institutions may want to be advised immediately of any losses sustained above a certain dollar amount, or a certain percentage of the institution’s holdings.  Whatever an institution’s threshold for immediate reporting is, it should be determined at the onset so that information can be provided to the institution if, and when an occasion arises that meets its predetermined criteria.

Designation of Institution Representative

The institution should designate a representative to whom both monthly and interim reporting should be made.  Communications with the institution are then limited to this individual or individuals, eliminating duplicative communications.  If set up properly with electronic data transfer, this should be the only communication required with the institution.  By transferring data, the institution does not have to “check” its holdings, either internally or through its money manager, and let counsel know its purchases/sales so that counsel can then determine the institution’s losses and get back to the institution.

By removing the unnecessary steps in the communication process, the information can be provided to the institution on an efficient and timely basis.  Timeliness and efficiency are critical, as an institution has just 60 days to quantify its losses and complete its analysis of whether or not to seek lead plaintiff status.  Thus, any delay in the analysis or transmission of data can be detrimental to the institution.

For more information on Robbins Geller’s Portfolio Monitoring ProgramSM, click here.