Purchase-Sale Matching in Securities Litigation: FIFO, LIFO, and Offsets

Thu Oct 09 16:24:38 EDT 2008
By Raymund Wong

There is an ongoing debate in securities litigation regarding the proper way to match purchases and sales in the calculation of damages for a single shareholder with multiple transactions. Many legal decisions have highlighted the issue of matching shares in securities litigation, but confusion is common regarding the concepts of capital gains and losses as opposed to damages due to an alleged fraud. In this paper, NERA Senior Consultant Raymund Wong explores the existing legal and theoretical support for the "First-In, First-Out" (FIFO) and "Last-In, Last-Out" (LIFO) methods, and examines the implications for damages calculations. The paper also reviews the concept of offsetting an investor's losses due to an alleged fraud with gains due to an alleged fraud.