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Securities, Options and Futures Consultants

How to Pick an Expert ...

The use of experts to examine evidence and present factual reports and testimony in financial dispute resolution has grown substantially in recent years as a consequence of the dramatic proliferation of new and sometimes exotic financial instruments and the market turbulence after the collapse of the tech bubble in 2000 and the mortgage-backed securities crisis of 2008. This growing demand has in turn attracted a growing number of “experts” in the field and underscores the need for careful selection procedure of an expert as a result.

It is assumed that an initial pool of candidate experts can be identified through some combination of personal knowledge, an on-line search, reference directories and word-of-mouth referrals. The following tips are offered to provide some guidance in this area, including suggestions for choosing among candidates with seemingly adequate credentials.

Start Early.

At some point, every expert has received a call to participate in a matter in which an expert must be identified and/or reports submitted in a matter of days after the initial inquiry. Such late engagements ill serve the best interests of the client on a number of counts.

To begin, the better an expert the more likely it is that he or she has a full schedule of matters under review. Short notice requests will often effectively eliminate a superior candidate on the basis of scheduling conflicts alone, with the remaining available candidates being, by definition, second or third choice at best.

Further, well-prepared expert testimony requires time on the part of the expert to review and absorb the case documents, to conduct research, to reflect on optimal strategies and to develop well-reasoned reports (if needed) including solidly supportable damage assessments. An assumption that the expert need only testify to a narrow issue can easily overlook problems that may be well known to experts in the field.

When retained early, the expert can provide valuable assistance in the development of the case including framing the issues at dispute, assisting with the complaint and discovery including offering guidance for depositions of other witnesses and providing other contributions to ultimate success.

A common but flawed rationale for delay is the presumption that a case may settle before expert testimony is required. In our experience, the majority of cases do in fact ultimately settle; however, the presence of an expert can assist such settlements by strengthening the arguments presented and offering a comprehensive analysis of the damages suffered. Indeed the mere presence of an expert can stimulate settlement by conveying the ability and willingness of the retaining party to pursue the case to hearing or trial. The skills of Market Consulting Corporation in the settlement area are based upon working as a consultant with the Office of General Counsel for a number of Wall street firms over a number of years. (See Settlement.)

Look for Experience.

While superficially obvious, the notion of experience implies some very specific attributes on the part of the expert. Education and work history are certainly important as they suggest a general intellectual capacity along with real world skills and accomplishments, important factors both for initial selection and, ultimately, in establishing credibility in hearings or delivered testimony.

The expert should be experienced in presenting testimony in a variety of venues, whether in deposition, at mediation or arbitration hearings or in court settings at both the state and federal levels. While it is essential to possess knowledge in a subject to pass a Daubert challenge, it is quite another to be able to convey that knowledge in a convincing manner under pressure.

Although each case is unique, a broadly experienced expert should be able to cite prior matters with closely related issues for overall guidance and insight. Ask for summaries of similar cases or other indicators that the expert has directly relevant experience.

Seek knowledge of the law, regulations and industry practices.

The expert, of course, is not the attorney trying the case but should, nevertheless, have a good understanding of applicable federal and state laws and case precedents related to a given matter. Such knowledge should include familiarity with Securities and Exchange Commission regulations as well as rules and requirements of the major stock and commodity exchanges. In addition, the expert should have excellent familiarity with brokerage firm compliance and branch manager manuals to serve as reference standards for broker behavior and performance.

Choose a communicator.

At some point, your expert may be called upon to explain fairly esoteric financial concepts to a jury of laypersons or, more likely, a mediator or arbitration panel whose members, while professionals in their respective fields, will not be knowledgeable about particular issues related to the case at hand. As such, it is important that the expert have the ability to explain technical matters in plain and simple language to allow you to make a convincing case for your client’s position. You can get a sense of the expert’s communications capabilities by looking for prior activities such as teaching or public speaking along with your own personal experience in discussing the case with the prospective expert.

Don’t make a decision on the basis of cost alone.

The probable impact of an expert’s input in a case is far too great to base a selection on fees alone. As a practical matter, expert fees typically represent only a small portion of the overall case expenses, yet the consultation and expert services provided can have a dramatic impact on the ultimate outcome. The apparent economy of working with the lowest bidder can be lost in multiples in unfavorable final decisions. While no one can guarantee a positive result, selecting an expert solely on the basis of cost can be the path to a less than optimal resolution.

See:
The Role of the Expert Witness in Securities Arbitration
The Role of the Expert Witness in Commodities Cases