Q: What are 'class actions' and 'securities class actions'?
A: Class actions are lawsuits seeking collective redress (usually compensation) on behalf of a particular group or class of people who have been or may have been affected by the defendant’s actions. It helps the complainant, the defendant and the judge that the claims are dealt with in one case rather than in several lawsuits. Class actions involving groups of individuals who have been badly affected by corporate mismanagement have been used as the basis for a number of films, including Erin Brockovich.
A: “Class actions” is a US term; similar (but different) kinds of proceedings outside the US are sometimes called representative actions or group actions. Group actions are the UK’s current form of collective redress and the law continues to develop both here and in the EU. There are important technical and practical differences between the different kinds of action.
A:The majority of class actions are filed in the United States where the court rules (generally) do not require the losing party to pay the costs of the other side.
A: Good class actions provide compensation to groups of people who have suffered loss or damage through no fault of their own. Bad (or spurious) class actions, which often depend less on the strength of the legal class and more on the threat of legal costs, are unethical and fortunately in many cases are dismissed by the courts. It is important to be selective when supporting class actions.
A: There is a macro-economic element in that, but in practice securities class actions provide compensation to investors who have suffered an inappropriate loss in value on their investments. This is compensation that would not have otherwise been available to them.
A: Lawyers make money (and in the US make and lose money) when they conduct litigation. But securities class actions are complex, lengthy and risky, and require specialist and experienced lawyers who spend several years of professional time preparing and presenting the case. In the United States, for example, specialist securities litigation lawyers take the risk of handling a class action on a contingency (i.e. no win-no fee) basis in return for a share of any award or settlement, usually at a rate of up to 30%. Their fees are supervised by the court. The balance is then split among shareholders in the class, that is, amongst investors within the class who have registered their interest in the action or settlement.
A: Securities class actions have been growing steadily in number since the mid-1970s, although they appear to be a particularly recent phenomenon owing to high profile cases such as Enron and Worldcom. In the United States alone, approximately 200 new securities class actions are commenced every year. The number of actions fluctuates from year to year and it is hard to discern a consistent trend.
A: The first hurdle for getting involved in any class action is proving your status as a member of the class that is involved. The court establishes qualifications – for example if you were a shareholder of XYZ plc holding shares between 1 January 2010 and 31 December 2010.
A: Continued involvement in any class action depends on where the class action has been filed. Some jurisdictions require you to "opt in" and take the positive step of stating you wish to be a part of the action.
A: Recovery depends on the facts of each specific case and the possibility of settlement. The industry rule of thumb suggests a recovery rate of around 3 basis points pa for equity portfolios.
A: There are instances where it might be better to run a case on your own rather than as a member of a group. But most investors prefer to act in a group, sharing or outsourcing the management of what can be complex, expensive, time-consuming and risky litigation requiring specialist knowledge. iiTRA, in its claims management services, operates on the basis that managed class actions enable affected parties to benefit from pooling the collective interests of all members of the class and avoiding needless duplication in process, including due diligence, case preparation, court time and legal fees and then claim filing. Sometimes it is not necessary for you to be a party but simply to rely on others to claim and then file your own claim on the back of that claim. There are therefore free-rider opportunities, but iiTRA operates on the basis that free-rider opportunism may involve inappropriate governance.
A: Class actions are lawsuits seeking collective redress (usually compensation) on behalf of a particular group or class of people who have been or may have been affected by the defendant’s actions. It helps the complainant, the defendant and the judge that the claims are dealt with in one case rather than in several lawsuits. Class actions involving groups of individuals who have been badly affected by corporate mismanagement have been used as the basis for a number of films, including Erin Brockovich.
A: “Class actions” is a US term; similar (but different) kinds of proceedings outside the US are sometimes called representative actions or group actions. Group actions are the UK’s current form of collective redress and the law continues to develop both here and in the EU. There are important technical and practical differences between the different kinds of action.
A:The majority of class actions are filed in the United States where the court rules (generally) do not require the losing party to pay the costs of the other side.
A: Good class actions provide compensation to groups of people who have suffered loss or damage through no fault of their own. Bad (or spurious) class actions, which often depend less on the strength of the legal class and more on the threat of legal costs, are unethical and fortunately in many cases are dismissed by the courts. It is important to be selective when supporting class actions.
A: There is a macro-economic element in that, but in practice securities class actions provide compensation to investors who have suffered an inappropriate loss in value on their investments. This is compensation that would not have otherwise been available to them.
A: Lawyers make money (and in the US make and lose money) when they conduct litigation. But securities class actions are complex, lengthy and risky, and require specialist and experienced lawyers who spend several years of professional time preparing and presenting the case. In the United States, for example, specialist securities litigation lawyers take the risk of handling a class action on a contingency (i.e. no win-no fee) basis in return for a share of any award or settlement, usually at a rate of up to 30%. Their fees are supervised by the court. The balance is then split among shareholders in the class, that is, amongst investors within the class who have registered their interest in the action or settlement.
A: Securities class actions have been growing steadily in number since the mid-1970s, although they appear to be a particularly recent phenomenon owing to high profile cases such as Enron and Worldcom. In the United States alone, approximately 200 new securities class actions are commenced every year. The number of actions fluctuates from year to year and it is hard to discern a consistent trend.
A: The first hurdle for getting involved in any class action is proving your status as a member of the class that is involved. The court establishes qualifications – for example if you were a shareholder of XYZ plc holding shares between 1 January 2010 and 31 December 2010.
A: Continued involvement in any class action depends on where the class action has been filed. Some jurisdictions require you to "opt in" and take the positive step of stating you wish to be a part of the action.
A: Recovery depends on the facts of each specific case and the possibility of settlement. The industry rule of thumb suggests a recovery rate of around 3 basis points pa for equity portfolios.
A: There are instances where it might be better to run a case on your own rather than as a member of a group. But most investors prefer to act in a group, sharing or outsourcing the management of what can be complex, expensive, time-consuming and risky litigation requiring specialist knowledge. iiTRA, in its claims management services, operates on the basis that managed class actions enable affected parties to benefit from pooling the collective interests of all members of the class and avoiding needless duplication in process, including due diligence, case preparation, court time and legal fees and then claim filing. Sometimes it is not necessary for you to be a party but simply to rely on others to claim and then file your own claim on the back of that claim. There are therefore free-rider opportunities, but iiTRA operates on the basis that free-rider opportunism may involve inappropriate governance.
