FRT FAQs: Opt-In Monitoring
1. What is an Opt-In Action?
Opt-In shareholder litigation primarily involves cases brought outside of the United States in which the legal jurisdiction does not allow for passive participation. In the U.S. and other opt-out markets, damaged investors are included in the group or class and are bound by the outcome of the litigation automatically unless they explicitly opt-out of the settlement. In opt-in jurisdictions, damaged investors are not automatically included in the group and investors must explicitly opt-in and join the direct litigation against the defendant. This model presents different risks and requirements for pursuing recoveries.
2. What are the risks of joining an Opt-In Action?
Each country has different securities laws, court rules, and ways of dealing with claims by multiple investors; but common factors necessary to understand the associated jurisdiction risks include Costs, Discovery and Anonymity.
- Costs – Who will pay the lawyers and court costs, and what is the risk of adverse party cost shifting (the requirement in most countries that the losing party must pay the other side’s legal costs, in whole or part)?
- Discovery – Investors must consider the burdens, including staff time and resources, associated with
registering their claims, proving the elements of their claims, and responding to the other side’s requests for documents and testimony, either by discovery or request of court. - Anonymity – If you join, how transparent will your involvement be to the other side and publicly?
The legal landscape in each country is constantly evolving and staying on top of the changes is crucial to maximizing recovery opportunities.
3. What factors should be considered when making a participation decision?
When deciding whether to get active, we suggest you consider factors including:
- Estimated losses: In an effort to help our clients compare ‘apples to apples’ and give more certain and timely assistance, FRT has developed its own loss formula using the most inclusive of the organizer time periods and securities. If you decide to get active, we will, with your prior consent, blind your trade data and send it to the organizers you’re considering for further analysis.
- Legal mechanism: Successfully navigating securities litigation outside of the U.S. requires a comprehensive understanding of the varying legal mechanisms for handling group actions in different global jurisdictions. The primary mechanisms can be broken down into the following categories:
- Passive Registration / Claims Filing: This U.S.-style, passive registration or claims filing involves investors filing participation agreements or proof-of-claims forms with court-appointed administrators or litigation organizers. This approach allows investors to recover losses without having to actively participate in litigation.
- Active Litigation – Low, Moderate and High: Active Litigation requires prospective claimants to affirmatively sign up (or register) with the organizing law firms and litigation funders. Classes are expressly defined and limited to investors who (a) purchased shares, (b) suffered losses, and (c) thereafter registered by signing the attorney engagement and funding agreement.
- Adverse costs: While it varies depending on jurisdiction, cost exposure is the out of pocket risk for the client to join the non-U.S. action. It may correlate with claim size and for certain jurisdictions you should be able to quantify this risk in advance.
- Anonymity and Burdens: The public exposure of client’s name and participation are dependent on jurisdiction. The required corporate formalities for registration may or may not be known yet, but the court ultimately sets parameters on the information parties must provide.
4. What factors should be considered when deciding to join a specific action or choosing amongst multiple options?
When deciding to join a specific action or chose amongst multiple options, we suggest you consider factors including:
- Whether their proposed time periods and covered securities capture your full trading activity.
- The organizer’s reputation and experience including track record of success.
- If the organizer has a minimum damage threshold to participate.
- The organizer’s proposed terms of representation, fee model, and insurance to alleviate any adverse party cost shifting.
- How likely the action is to succeed?
Learn More
To learn more about how FRT can help your firm automate participation and recovery in passive group actions, click here or contact us at learnmore@frtservices.com.
- Blogs
About FRT
SETTLED CLAIMS I NON-US PASSIVE GROUP I ANTITRUST I FUTURE CLAIMS I GLOBAL OPT-IN I US DIRECT OPT-OUT
Founded in 2008, Financial Recovery Technologies (FRT) is the leading technology-based services firm that helps the investment community identify eligibility, file claims and collect funds made available in securities and other class action settlements. Offering the most comprehensive range of claim filing and monitoring services available, we provide best-in-class eligibility analysis, disbursement auditing and client reporting, and deliver the highest level of accuracy, accountability, and transparency available. For more information, go to www.frtservices.com.
- Follow us on Twitter: @FRTServices
- Follow us on LinkedIn Financial Recovery Technologies
- Email us: learnmore@frtservices.com
This communication and the content found by following any link herein are being provided to you by Financial Recovery Technologies (FRT) for informational purposes only and do not constitute advice. All material presented herein is believed to be reliable but FRT makes no representation or warranty with respect to this communication or such content and expressly disclaims any implied warranty under law. Opinions expressed in this communication may change without prior notice. Firms should always seek legal and financial advice specific to their unique situation and objectives.