Solve problems with the help of over 100,000 institutional investors


The majority of an average institutional investor's portfolio is invested in securities that do not trade on an exchange. The majority is invested in the Over the Counter (OTC) market and prices for OTC traded securities vary between portfolios just as opinions of restaurants vary between people. While there is no debate about the price of a share of IBM, different investors do have different prices for IBM's bonds, IBM credit default swaps and long dated IBM OTC traded call options.

Each trading day Ten12 identifies over 100,000 examples where different investors value the same OTC traded security differently and sometimes very differently. Most of the pricing differences are less than 2% but differences of several hundred percent occur regularly.


At the core of Ten12 solutions is a database of 2.8 million investors with $218 trillion in assets. We receive portfolio positions with prices from over 100 thousand investors. While the bulk of these investors provide portfolio data annually, over ten thousand of these investors provide portfolio data quarterly and two thousand provide daily data.

The Ten12 Security Price is the mid of the first non-crossing market of all contributed prices for the specific security. As such, outlier prices from deeply optimistic or pessimistic price contributors do not influence the Ten12 Security Price. We use the prices to determine the institutional consensus security price for over 300,000 securities across 25 different asset classes.

Ten12 Security prices are used to independently recalculate the net asset value of funds, pension plans and portfolios. Additionally, to help investors understand their valuation risk, we also recalculate the NAV using both the most optimistic and pessimistic prices received.


There are essentially two types of investor scams: lying about what is owned or lying about what it is worth.

Since the Madoff Ponzi scheme was uncovered in 2008, the SEC has accused 174 funds of defrauding investors. While the Madoff scam provided several red flags that warned off many investors, the bulk of the losses post Madoff have been in funds that provided no obvious red flags. Specifically, 70% of the losses occurred in portfolios that used respected or "Big Four" accounting firms, respected custodian banks and reputable independent pricing vendors (whose prices were simply not used). These funds weren't lying about what they owned. They were lying about the value of what they owned. The frauds were accomplished using "U Turn Quotes" and similar methods to overvalue OTC traded securities by as much as 1,600% and in one case to hide portfolio losses that grew to $6.2 billion.


To help investors identify the more obvious red flags, Ten12 provides information on the accountants, custodian banks, fund administrators, prime brokers and independent pricing service vendors of 80,000 public and private funds. For each of these vendors, we provide a list of their fund clients. We also provide full FINRA BrokerCheck records for 1.2 million brokers and former brokers as well as a list of barred individuals.


For comparison, the Madoff Ponzi Scheme contained numerous red flags that indicated a problem. Their "audited" public financial statements were prepared by an accountant that reported they did not conduct audits and thus were not peer reviewed. Unsurprisingly, the accountant also had no public or private funds as a client. Additionally, they did not use an independent custodian bank. Since Madoff, both investors and regulators have become more aware of such red flags. As an example, the state of New York now requires fund accountants to be peer reviewed.


As BrokerCheck does not cover Investment Advisor Representatives, we have also included disclosure and employment history for those working for registered investment advisors. Additionally, we provide disclosure data on 35,594 investment Advisor firms and annual financial reports for 19,365 brokerage firms. For these firms, we also provide a partial list of their clients.


While investors and regulators have reacted to Madoff, so have scammers. Post Madoff, investor losses have primarily been with scams that unfortunately do not have obvious red flags. The method used in these scams is the "U Turn Quote". A U Turn Quote exists when an asset manager requests a non-binding broker quote at a specific inflated price that is used for valuation purposes only. Under Generally Accepted Accounting Principles (GAAP) rule ASC 820-10-35-54K, broker quotes are an acceptable source of security pricing and the asset manager not the accountant is responsible for determining accuracy.


While those tools are useful for identifying red flags of many scams, they would not protect against the "U Turn Quote" scam. Ten12 solves the "U Turn Quote" scam by independently calculating the Net Asset Value and providing it directly to the investor. As Ten12 calculates the NAV itself, its prices cannot be overwritten by "U Turn Quotes". Investors can get an assured independent valuation of their portfolio in less than 60 seconds by using the Ten12 Portfolio Upload tool.


While the Madoff scam provided numerous obvious red flags, a U Turn quote scam does not. A fund hiring a respected pricIng vendor does not protect investors against this scam. Sham U Turn quotes are used to override the price provided by an independent pricing vendor without notification to investors or typically the knowledge of the pricing vendor. Investing only with funds that use a respected accountant is always a good idea; however, U turn quote scams have occurred with funds that used “Big 4” accounting firms. Under both GAAP and Sarbanes–Oxley, it is responsibility of the asset manager to accurately value the portfolio.

While GAAP does not specifically state the number of quotes required to validate a price, in practice three quotes is considered sufficient. With over 700,000 brokers registered with the SEC, it is easy to obtain three non-binding broker quotes at any desired price.


The Ten12 Net Asset Value assures the investor actually receives an independent valuation as Ten12 calculates the NAV itself.


A fund hiring an independent pricing service is like a person joining a gym. There is no obligation to actually use the service. Additionally while a gym knows who uses their service, independent pricing vendors typically don't. They simply license a list of security prices. In general, they are incapable of informing investors whether their prices have actually been used because they don't know themselves.


Ten12 has identified over 100 funds that the SEC has charged with inflating the value of their OTC securities. Many of these funds reported to their investors that they used respected independent pricing vendors; however, according to the SEC they did not actually use the service.

Investors don't know when a fund is actually being independently valued or when it is only reportedly being independently valued. Additionally, when independent prices are not used, investors don't know whether this moderately impacted NAV or were used to hide losses that grew to $6.2 billion. They don't know whether the overwritten security prices are moderately different or 1,600% higher. They don't know if the "independent" pricing service is run by a convicted felon who is simply sending the portfolio manager whatever price they requested (i.e. "U-turn quotes"). All three of these SEC alleged scams occurred with portfolios that used a "Big Four" accounting firm.

Asset managers are very familiar with the markets that they are invested in and can have good reason not to use a particular independent price. Both GAAP and Sarbanes–Oxley make it clear that the asset manager is responsible for accurately pricing the fund. The SEC fined a public fund for inaccurately valuing its portfolio even though it used prices from an independent vendor. Independent does not by definition mean accurate. The problem isn't that asset managers can't accurately value their own portfolio. The problem is that investors have paid for an independent value but don't know if they are actually receiving an independent value.


The Ten12 Peer Consensus Net Asset Value assures the investor actually receives an independent valuation as Ten12 calculates the NAV itself. The Ten12 Peer Consensus Net Asset Value is not optimistic or pessimistic as it is calculated using Ten12 Security Prices. The methodology used when determining these prices removes outlier price contributions.

The Ten12 Gold NAV uses position data provided by an independent custodian bank while the Ten12 Silver NAV uses positions provided by the fund or portfolio.


Investors can receive an assured independent value of their own portfolio in less than 60 seconds by using our portfolio upload tool. In addition to the NAV using Ten12 security prices, we also provide the most pessimistic and optimistic valuations of their portfolio.

The primary tool that investors have to understand their valuation risk is the Level 123 table which categorizes securities according to their liquidity. However, there are four issues with the Level 123 table.


The Ten12 Level 123 security categorization covers over 300,000 securities in 25 different asset classes. We determine the consensus categorization using over 7 million Level 123 security categorizations obtained from institutional investors.

Using the Ten12 Level 123 security categorizations, we create a consensus Level 123 table for funds and portfolios.


Outlier Level 123 categorization submissions have virtually no influence. We use the 7 million inputs to calculate an average which is then rounded to the nearest Level 123 category.

Quantified Risk

In order to help investors better understand their valuation risk, we provide the most optimistic and pessimistic observed net asset value. These net asset values are calculated using the most optimistic and pessimistic prices out of millions received.


At the end of each trading day, Ten12 generates new security prices and calculates new observed valuation ranges. As such, investors get a dynamic view of how their valuation risk changes each day.


Whether it is caused by legitimate differences of opinion or fraud, each pricing difference represents one portfolio outperforming another based solely on how they priced the same OTC traded security. Traditional comparisons of fund performance based on fund reported NAV are an "Apples to Oranges" comparison as funds outperform other funds simply because they decide to value the same security higher. As such, investors can't determine if a particular asset manager has actually outperformed their peers or is simply more optimistic than their peers.


With Ten12 Fund Performance Rankings, differences in fund performance are caused by funds owning different securities and not simply by funds pricing the same security differently. Ten12 recalculates the fund's Net Asset Value using the same security prices across funds so investors finally have an "Apples to Apples" comparison of funds across nine different dimensions.

The Ten12 Silver Rankings use position data provided by the fund while Ten12 Gold rankings use position data provided by an independent custodian bank.