Recent HSBC judgment related to Household International sets securities class action records

FRT Admin
Site administrator
October 21, 2013

A final judgment was handed down this week requiring HSBC to pay $2.46 billion to investors, making it the largest securities fraud class action to go to trial. The settlement also ranks in the top-ten securities class actions of all time, which puts it in the company of Enron, Worldcom and Bank of America-Merrill Lynch. HSBC plans to appeal the decision that’s been 11 years in the making. With an appeal looming, it is likely much more time will pass before settlement proceeds are distributed.

HSBCLitigation against Household International, which was purchased by HSBC in November 2002, claimed that officers of the company made false and misleading statements that inflated the company’s share price. The suit, filed in 2002, also alleged Household artificially boosted its share price by engaging in predatory lending and hid the quality of its loan portfolio. The securities class action came on the heels of reports that emerged in 2001 regarding Household’s lending practices, which caused the share price to hit a seven-year low.

This decision stands out due to the size of the settlement and because the vast majority of securities class actions settle without the need for a jury trial. In fact, since 1996 less than 30 cases have gone to trial. Of those trial cases, verdicts were reached in only 22 of the cases.

FRT will continue to track this case and keep you informed of any developments and the final outcome.

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