The Most Money I Ever Found in a Divorce Case? From Securities Filings
It’s not even a close call. Sometimes I can find hundreds of thousands of dollars in a company or two that may eventually lead to a better settlement, sometimes a vacation home that was being tucked away or grossly undervalued.
But for finding assets in the millions, there is nothing like securities filings relating to stocks or mutual funds.
Not all ownership of stock or funds is a matter of public record. But in two cases I have done, the requirement that a company needs to disclose anyone with more than a five percent ownership stake can be an investigator’s best friend.
These five percent ownership findings come in a couple of different ways:
- For companies and closed-end funds registered under the Investment Company Act of 1940, there is a requirement to file schedules 13D or 13G[1] for direct or indirect beneficial ownership of more than five percent of a fund. That means even if Husband’s LLC owns the shares, that fact has to be disclosed. We then get to find out about the name of his company.
Recently, I was working directly with a wife in divorce. She was particularly interested in whether her husband owned a particular blue chip stock that this company had invested in, but which she suspected he also owned directly.
We found $1 million owned personally by the husband, thanks to a 13D filing. He had a fairly uncommon name, but there were still hundreds of filings to get through. Searching the 13D or 13G filings first is never a bad thing, followed by the Form 3, 4 or 5 filings for holdings by senior executives.
- For open-end mutual funds, there is a registration form called an N-1A registration under either Section 12 of the Securities Exchange Act of 1934. It too calls for disclosure of anyone owning more than five percent.
I wrote previously about finding some $55 million hidden by a husband, mostly through looking at N-1A registrations. Since I had no idea which companies he could own, I had to do a keyword search on his name. It was not that common, but enough hits came back that I had to weed out other kinds of filings that would not have revealed beneficial ownership. The N-1A is one we always consult. Fortunately, when I came across a huge holding, they helpfully included his home address.
Another example of “finding it on the internet” taking hours of painstaking trimming and adjustment of search parameters – instead of seconds.
It’s not just about knowing where to look, but how to look.
[1] https://www.ecfr.gov/current/title-17/chapter-II/part-240/subpart-A/subject-group-ECFR7ce825ff9acf140/section-240.13d-1
