Securities Class Action Recovery
A Securities Class Action is a juridical figure that provides redress of damage to investor losses originating from a fraud or other misconduct from a securities issuer.
Typically, securities class actions are the result of violation of federal securities laws, including but not limited to, releases of materially false and misleading statements, omissions and improper disclosures or accounting impacting the value of the securities held by investors.
In most of the cases, before proceeding to trial, the class action claim is settled by the defendant, providing a sum of cash or securities for investors to recover the damages they suffered while investing on the securities issued or manipulated by the defendant.
The main aim of a Class Action suit is, thus, providing a compensation in cash or securities that can reach every investor despite its size or their involvement during the early litigation phases, something that would not be possible if every investor had to litigate separately on their own.
In most of the cases there is no need to participate actively in any litigation to be eligible for a compensation.
No information on payments and involved holders is made public.
When a compensation fund is established, every affected investor can adhere and benefit from the compensation anonymously. Any investor who purchased or held the security within the court-appointed relevant period and was damaged thereby is entitled to participate in the distribution of such funds.
The range of securities susceptible of being actioned is expanding every year, from plain vanilla securities and traditional equity instruments varying to complex securities and OTC instruments traded in dark pools, as well as benchmarks, interest rates and derivatives.
Recently, there has been a notable increase in international securities litigation, especially in Europe.
The legal nature of a Class Action is related to the compliance of the fiduciary and custodian duties that institutions and asset managers are due towards their beneficial owners.
Securities Class Action Worldwide
United States (US):
Securities class actions are a prevalent legal mechanism in the US, allowing investors to seek compensation for losses resulting from corporate misconduct or securities fraud. The legal framework is robust, providing a means for affected investors to participate in class action compensation fund distribution.
Canada (CA):
In Canada, securities class actions are on the rise, offering investors the opportunity to recover losses caused by misrepresentation or other violations of securities laws. The legal landscape facilitates collective actions, ensuring a fair and accessible process for affected parties.
Australia (AU):
Securities class actions in Australia have gained prominence as a mechanism for investors to seek redress for corporate wrongdoing. The legal system supports class actions, allowing investors to join forces in pursuing compensation for losses resulting from breaches of securities laws.
Rest of the world:
Many countries worldwide have adopted or are considering similar legal mechanisms to protect investor rights and provide avenues for compensation in cases of securities fraud or corporate misconduct. In most cases taking part during the litigation phase is required to be able to receive compensation in contrast to what is established in the US and Canada where affected investors are automatically counted as part of the “class” who can benefit from the settlement fund.
Why monitoring services for securities class actions are important to you?
- Each year between 100 and 200 securities class actions result in compensation funds for the benefit of harmed investors.
- There is no centralized source of security holders affected in a particular case, requiring investors to act to recover their corresponding share in each compensation fund.
- Compliance with fiduciary duties to beneficial owners.
FAQs
How many compensation funds are available for distribution every year?
The number of compensation funds available for distribution can vary annually. It depends on the prevalence of securities class actions and the successful resolution of these cases through settlements or judgments. On average 46% of all securities class action cases result in a settlement agreement for the benefit of harmed investors. The financial landscape and regulatory environment play significant roles in shaping the frequency and scale of compensation funds, but on average 110 new funds are available for distribution to investors anually.
How relevant are the funds being distributed?
The funds being distributed are highly relevant as they represent a form of restitution for investors who have suffered financial losses due to securities fraud or corporate misconduct. These funds aim to compensate affected parties for their economic harm and contribute to holding wrongdoers accountable.
Regarding the size of the compensations, it is important to note that each fund is unique. Each year on average 4,2 Bn USD are available for distribution to harmed investors without having to take part in any kind of litigation or being publicly exposed. Cases such as Enron (7,2 Bn USD), WorldCom (6,1 Bn USD) or Tyco International (3,2 Bn USD) are some of the largest settlement funds distributed in past years.
How is the value of my compensation calculated?
The calculation of compensation value is typically based on the extent of financial harm suffered by the investor. Factors such as the size of the investment, the degree of misrepresentation or misconduct, and the terms of the settlement or judgment all play a role in determining the final compensation amount.
The distribution of the fund is done proportionately based on the pro-rata share of the individual damages in comparison to the aggregate damages alleged by all eligible investors who filed for recovery.
Do I need to engage a law firm or attorney to recover the compensation?
No. Legal representation or advise is not mandatory to secure a compensation.
However, it is advisable to seek the expertise of a company specializing in securities class actions recovery who can guide you navigate the complexities of the process, ensuring that your rights are protected and that you receive fair compensation.
Claiming for recovery implies taking part in litigation?
No. For compensation funds established in the United States and Canada claiming for recovery is possible without having to take part during litigation.
As general rule outside of the United States and Canada, investors need to take part during the initial stages of the litigation to be entitled to any compensation which can derive, with some exceptions.
Is there any kind of risk of public exposure?
In the United States and Canada, participating in class action recovery does not expose individuals or institutions to public scrutiny. The process is designed to protect the privacy of claimants. However, it’s essential to rely on a specialized company in securities class action recovery who can provide guidance on confidentiality and privacy concerns.
Who can claim for recovery?
Generally, any investor who has suffered financial losses due to securities fraud or corporate misconduct can claim for recovery. The eligibility criteria may vary based on the specifics of each case, a class action recovery specialist is crucial in assessing the value of a particular recovery.
What type of documentation is needed to file a claim?
Supporting documentation may include financial records and transaction history. These documents help substantiate your claim and provide evidence of the losses incurred.
How long does it take to recover the funds?
The duration of the recovery process varies and can take several months to years. Once a case has been settled for the benefit of harmed investors on average distribution of the compensation funds happens within the next 12 to 24 months following filing.
Remember that to guarantee maximum transparency on the awards received, Suigen works with a globally recognized Escrow Agent and top-tier financial institutions to process the awards of our clients.
Can I know in advance the value of a potential recovery?
Only estimates can be provided in advance as the final value of a particular recovery is typically known only when the fund is distributed in full. The final value depends on the number of eligible investors that filed for recovery and their corresponding losses, something that is unknown in advance.
What happens if an investor doesn’t claim its share?
Unclaimed funds are distributed among participating claimants. It’s crucial to actively monitor the claims process to ensure you receive your fair share of the compensation.
What can I do if I am liquidating an investment vehicle?
If you are liquidating an investment vehicle, it’s essential to perform a securities class action recovery appraisal. Depending on the circumstances, you may still be eligible to participate in ongoing or future class actions related to the investment, specialized professionals can guide you on the best way to monetize the value of such opportunities prior to liquidating the investment vehicle.
What happens if I do nothing?
If you choose not to file for recovery, you may forfeit the opportunity to receive compensation. Taking proactive steps to engage in the recovery process is essential to maximize your chances of receiving a fair share of the funds and complying with your fiduciary obligations.
What are the implications of excluding yourself from the distribution of a compensation fund?
By excluding yourself from the distribution of a compensation fund, you relinquish the right to share in the funds allocated to the class. While this may be a strategic decision under certain circumstances, it’s crucial to weigh the potential benefits and drawbacks with the guidance of professionals.
How do ethical considerations play a role in securities class actions recovery?
Ethical considerations are integral, ensuring fair compensation, accountability, and transparency.
Is participating the distribution of a class action compensation fund ethical?
Yes, it aligns with ethical principles by seeking restitution and holding wrongdoers accountable. In addition, actively monitoring and securing compensation funds allow institutional investors comply with their fiduciary duties.