1. The financial advisor was managing the financial assets of the Cable family. The adviser had non-discretionary control for a majority of the relationship and during the period at question. A bank executive received stock options where the acquisition price was one-dollar ($1.00). The adviser was dealing with a concentrated position and verbally advised the client to diversify the portfolio. Over the twenty-year relationship the stock grew and paid significant amount of dividends. Enough money that the family set up several trusts for children and grand-children. The adviser continued to encourage the patriarch to diversify, but he refused. In 2008 the stock fell from $80 per shared down to fifty cents ($0.50) then back up to ten dollars ($10.00). The family, led by the patriarch sued the adviser for breach of fiduciary duty, but not forcing them to diversify the portfolio. The cost was over two and a half million dollars ($2.5M).
2. An investment adviser managed a large public pension retirement fund. The fund manager sent a letter to the adviser stating that the adviser’s contract was being terminated at the end of the business day and instructing the adviser to cease trading at that time. That day the adviser liquidated the portfolio of thinly traded securities and put approximately 80% of the funds in cash or cash equivalents. The advisory contract contained a stipulation that the adviser must advise the client if more than 20% of the fund’s assets are cash, but the adviser did not advise the fund manager for several days. During that time, the stock portfolio, had it remained intact, would have increased in value by more than $7 million. The fund sued the adviser, alleging failure to adhere to contract provisions. The case settled for over $5 million