1. What is the length of a securities class action litigation?
Every year, millions of dollars in settlement funds are distributed to eligible shareholders as a result of securities class action lawsuits. A securities class action litigation may last 3 to 5 years from the time of initial complaints being filed, through settlement, and ultimately to disbursement. On average, it takes roughly 15-18 months after the time of settlement for the first disbursement to take place. That said, there is a wide variability with some cases taking only a few months and others taking years. Download our Shareholder Class Action Primer to find out the four stages of the class action claims process.
2. How does the structure of trade data impact recoveries?
FRT is committed to representing each claimant’s trading history as accurately as possible. Two areas where FRT can help refine the representation of trades in a claim submission are tax-free inter-account transfers and asset owner vs. asset manager-lever trade association. These processes ensure the claimant receives the CORRECT recovery amount (i.e., the full amount to which they are entitled), not necessarily the GREATEST recovery.
- Tax-Free Interaccount Transfers: A commonplace event in the trading histories of FRT’s clients is for one account to freely deliver some of its shares to another account, both of which are owned by the same parent entity. Such occurrences are referred to as tax-free transfers. Often this is represented within trading data as a pair of zero-priced transactions; the delivering account has a zero-priced sale, while the receiving account has a zero-priced purchase. The challenge with including such trades in a claim submission is that, without knowing the initial and final disposition of each lot of shares, the claim administrator cannot calculate recognized loss, and therefore is forced to assign zero recognized loss. This means no recovery will be possible. Therefore, it is necessary when filing claims to match free receives with free delivers and then move the corresponding initial purchase of the delivered shares into the receiving account. This process allows the administrator to see the full picture of the claimant’s damages, ensuring the claimant receives the full amount to which it is entitled.
- Asset Owner vs. Asset Manager-Level Trade Association: There are two levels of trade organization for entities within settlements and your choice may impact the size of the recovery. When you are a single-TIN asset-owning entity, you may be able to treat each of your individual asset managers distinct accounts, or as components of a single whole. FRT therefore calculates, when appropriate, the recognized loss associated with each organizational strategy, and then files to maximize recoveries.
3. How do I know my recovery amount is everything I am entitled to?
FRT calculates the recognized loss of each claim before it is filed so that when the settlement checks are distributed, we can reconcile the payment amounts. Recognized loss occurs when there is inflation in the purchase and sale price of a stock. Recognized Loss is a claimant’s eligible amount determined using a formula specified in the Plan of Allocation created in connection with a securities class action settlement. FRT looks at the pro-rata percentage published by the claims administrator handling the settlement and then compares the amount to our internal calculations to ensure that the client receives all the monies they are entitled to. Download FRT’s report ‘Calculating Inflationary Losses’ to better understand the three types of losses in securities fraud cases.
4. When should I expect to receive my settlement check?
The average recovery takes place roughly 15 months after settlement. FRT reviews every single payment it receives for accuracy prior to disbursing the check to the client. If no discrepancies are identified, a client can expect remittance within 30 days of FRT’s receipt of the payment. If a discrepancy between actual and expected payment is identified during the review, it may take longer for remittance – until the administrator and FRT, both agree that the claimant will receive the full amount to which they are entitled.
5. Are all settled class action settlements alike?
No. While the process for many class action settlements is consistent, there are many exceptions per year. Often settlements have unusual, settlement-specific requirements for the data necessary to successfully submit a claim form. It is important to identify any such deviations from the norm and to handle them appropriately. For example, the recent set of cases involving FX Fees on American Depository Receipts required very atypical data to successfully submit claims. That said, the different types of class action are:
- Antitrust class actions: Antitrust class action alleges that a company has engaged in anti-competitive practices. Some antitrust lawsuits may go on trial, but mostly they will be settled beforehand.
- Consumer class actions: A consumer class action is when one or more consumers sue an entity or a large company for violating consumer rights.
- Employment class actions: When multiple employees endure the same workplace discrimination, they all get together and file a complaint against the employer.
- Securities class actions: This type of class action is filed by investors who bought or sold a company’s publicly traded securities during a class period and suffered economic loss; which as a result violates the law.
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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.
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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.