Five Key Takeaways from the On-Demand Webinar: Developing a Securities Litigation Claims Recovery Strategy

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  1. Why asset owners should have a securities litigation claims recovery policy.
  • Fiduciary Responsibility: A well-developed policy is good fiduciary practice, aligning with your prudential responsibilities. Securities class actions offer significant potential recoveries, and failing to monitor and evaluate these opportunities could breach your fiduciary obligations.
  • Focus and Noise Reduction: In a complex global securities litigation landscape with numerous opportunities, a policy helps cut through the noise. It allows you to focus on the best recovery opportunities, ensuring that you don’t miss out on potential claims that matter.
  • Accountability and Compliance: A policy provides a structured approach for reporting to governing boards, executives, and shareholders. It creates an audit trail demonstrating your compliance with fiduciary responsibilities and safeguards against potential claims of breach of duty in an increasingly litigious society.


  1. A securities litigation policy distinguishes between passive and active efforts.
  • Risk Management: Passive cases do not involve entering into active litigation against a defendant. Investors typically join these cases only after a case has settled or is about to settle. There is little or no risk to joining these types of cases, so participation can be automated, reducing the decision-making burden.
  • Active Case Evaluation: Active cases involve becoming a participant in litigation against a defendant. Investors join these efforts at the start of a case, before settlement has occurred.  They involve greater risks and require more deliberate decisions about whether to join.  A policy simplifies this process by setting loss threshold amounts based on jurisdictional risk levels.  If your losses in a case exceed your thresholds, it sets out a list of factors to analyze in making the decision about whether to join, e.g. registration burdens, discovery requirements, risks of adverse costs, case merit, contractual protections, etc.  This structured approach allows you to focus on cases where the loss amount justifies the risks involved in joining.


  1. Automate decisions where you can simplify the process and reduce operational burden by narrowing the number of cases requiring detailed analysis.
  • The global securities claim landscape is complicated and involves hundreds of cases across dozens of countries.  A good policy reduces the number of cases you need to focus on to something manageable.  It streamlines the process by automating decisions when possible, for example in passive cases, such as U.S. class action settlements, SEC Fair Funds, and antitrust cases.  It then further narrows the universe by implementing thresholds, so you only participate in cases where your losses exceed certain amounts.  This brings the number down to approximately 6-8 active opt-in cases per year for which you have to make deliberate joining decisions.


  1. A good policy should:
  • Distinguish Between Passive and Active Cases: Defining these terms, automating passive registrations, and creating a process for evaluating active efforts.
  • Incorporate Internal Approval Processes: Explaining which individuals and groups within your organization need to approve which steps in the procedure, reducing the work involved in making joining decisions, and streamlining the process.
  • Set Thresholds Based on Risk Levels and Define Factors to Consider in Active Cases: Determining loss thresholds for various jurisdictions based on risk level and enumerating factors to consider when deciding to join active opt-in cases that exceed your thresholds. This allows you to focus you time and energy on efforts where the potential recovery exceeds the risks.


  1. Policies can be nuanced and incorporate additional factors such as:
  • ESG Considerations: Enhance your policy by incorporating Environmental, Social, and Governance (ESG) factors. Consider using a Litigation ESG scoring system to evaluate the impact of potential recovery actions on ESG concerns. Align recovery opportunities with your organization’s ESG priorities.
  • Identifying Low-Hanging Fruit: Design flexible policies that identify and evaluate low-hanging fruit cases—active cases with a greater likelihood of settlement with lower risks. Take advantage of positive case developments or external pressures on defendants that could encourage quick settlement and expedite recoveries.
  • Adaptability to Nonstandard Efforts: Acknowledge the dynamic nature of recovery efforts. Ensure your policy can identify and incorporate novel avenues for recovery, such as bankruptcy-related proceedings and appraisal cases, which do not fit the traditional securities class or group action mold.


In conclusion, a well-crafted securities litigation claims recovery policy is essential for fulfilling fiduciary responsibilities, managing risks, and optimizing recoveries in a complex and evolving securities litigation landscape.


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