Posted by Chris Higgins on Fri, Feb 17, 2012 @ 10:59 AM
NERA releases 2011 year-end review of securities class action litigation
NERA Economic Consulting released their wrap up of last year’s securities class action litigation. According to NERA’s 2011 report, federal securities class actions continued on a steady path last year in comparison to the previous three years. A relation between the most common allegations for each case and the types of cases has become apparent. Breach of fiduciary duty and accounting allegations were the most common in 2011, while the two most common types of suits involved merger & acquisitions and U.S.-listed Chinese companies. Accounting allegations were the major cause of suits against Chinese issuers, while breach of fiduciary duty allegations were cause for the rise in M&A objection lawsuits.
Among breach of fiduciary duty and accounting allegations, misleading earnings guidance and other product/operational defects were also prominent last year. Allegations concerning defects of financial products consisted of only 5% of the total number of cases filed in 2011. This is a significant decrease from the 15% of cases that was recorded in 2007-2009 as a result of the financial crisis.
2011 saw a decline of credit crisis-related lawsuits, which were responsible for the majority of securities class action cases in years past. The number of credit crisis suits involving mortgage-backed securities and collateralized debt obligations has returned to levels last seen five or six years ago. This decrease can be tied to the progress made of addressing a backlog of such cases, as well as the statute of limitations being reached in these types of cases.
According to NERA’s report, 2011 was most notably marked by the increase in cases filed against U.S.-listed Chinese companies and M&A-related lawsuits. It seems as though the wave of credit crisis cases has crested, as fewer of these cases are expected in the future. A positive trend for institutional investors looking to recover class action settlement dollars, 2011 marked the third highest median settlement value on record. By partnering with a securities class action recovery service provider like Financial Recovery Technologies (FRT), you can be assured your firm capitalizes on all potential settlement dollars it is likely to receive. The trends indicate that securities class actions will continue with a steady stream of litigation, increasing the pool of available recovery funds.
Contact FRT today to learn more about how we can be of service to your organization.
Click here to read NERA’s Recent Trends in Securities Class Action Litigation: 2011 Year-End Review.
Posted by Chris Higgins on Fri, Jan 20, 2012 @ 10:49 AM
Mergers & acquisitions, U.S.-listed Chinese companies, and credit crisis litigation among the top securities class action stories in 2011
The close of 2011 was marked by several trends in regards to securities class action litigation. The three most prevalent issues involved were mergers & acquisitions (M&A), U.S.-listed Chinese companies, and subprime and credit-crisis lawsuits, according to Kevin LaCroix of the D&O Diary. Other noteworthy topics in the arena of securities class actions include whistleblower lawsuits and foreign investors seeking litigation outside of U.S. jurisdiction.
The bulk of securities class actions have shifted from the traditional securities litigation to focus more on corporate actions. When considering both federal and state lawsuits, the number of litigations surrounding mergers & acquisitions has surpassed federal securities lawsuit filings. M&A cases are generally settled quickly by corporate defendants and can result in significant fees for plaintiff attorneys, making these types of cases increasingly popular.
In another trend, U.S.-listed Chinese companies have come under fire since 2010, most notably with cases brought against 39 different Chinese organizations in 2011. Litigation against U.S.-listed Chinese companies represented roughly 20% of all securities class action cases filed in 2011. Litigation against these companies is primarily driven by a response to questionable accounting practices. As LaCroix points out, “the recent litigation against the U.S.-listed Chinese companies is a reminder of circumstance-specific events that can drive securities class action lawsuit filings.” It is hard to judge the cause or level of activity involving securities class action litigation, which serves as further proof that keeping up on class actions requires a well-advised resource.
There are numerous lawsuits involving subprime and credit-crisis issues that have yet to be resolved. The most notable aspect of subprime and credit-crisis litigations is the settlement amounts, which rank among the highest of settlements in 2011. Some examples include the $627 million Wachovia bondholders settlement, the $315 million Merrill Lynch Mortgage Backed Securities settlement, and the $417 million Lehman Brothers offering underwriters settlement. While the number of cases filed involving the credit-crisis has waned, the backlog of unsettled cases presents the opportunity for substantial settlement recoveries.
It seems that securities class action litigations will continue to remain significant going forward. It is important for you and your organization to have a method to addressing class action claims in order to receive all of the settlement funds that you are entitled to receive.
Contact FRT today to find out more about our proprietary technology platform and processes that will help ensure your firm sufficiently addresses securities class actions.
Read Kevin LaCroix’s article for an overview of 2011 securities class action trends.
Posted by Chris Higgins on Wed, Jan 18, 2012 @ 08:13 AM
An Open Letter to FRT Clients from Rob Adler
I am excited to be joining the FRT team and look forward to working with many of you in the coming months. As I considered this opportunity, I spent some time learning about FRT’s business, its people, and its history with clients and partners. What impressed me most was observing a team that is so focused on helping clients. This is a credit to David Bedard, who has done a great job creating this foundation and positioning the company for future success. In just 3 short years, FRT has become the leader in settlement recovery for investors.
The key to this success is not in our proprietary technology or our proven processes, but in the dedicated service we provide to our clients and our team’s unending focus on quality. It’s what differentiates FRT today and it’s what I learned was the key to success in my previous company CCBN.
CCBN offered an industry-leading information service known as StreetEvents, a calendar of event information for professional investors that became a staple on the desktop of the investment community. We created a must-have product for investors with an application that they relied on every day to help make them more efficient. We listened to the needs of the analysts and portfolio managers who used this calendar and in turn, created a world-class transcription service, which was a true game-changer for buy-side investors. And this was all possible because we focused on delighting our clients as the primary metric of success.
Looking ahead, I see tremendous opportunity for FRT here in the U.S. and in working with customers internationally, both with our existing suite of services and with new products. I look forward to driving the next level of growth for FRT, while continuing to provide exceptional service to you.
Sincerely,
Rob Adler
President, FRT
Click here to read the official news release announcing Rob as FRT's new President.
Posted by Chris Higgins on Wed, Dec 21, 2011 @ 11:41 AM
International Securities Class Action Overview
While the majority of the world’s securities class action settlements occur in the United States, the international scope of class actions is continuing to expand. Many international countries routinely experience securities class actions, while other countries are new to the concept. The bulk of international class actions occur in Canada and Europe, with Asian countries beginning to implement systems similar to what exists in North America and Europe. As another example, Mexico will begin allowing class actions for the first time in early 2012.
Every country and jurisdiction has its own set of rules governing class actions that are constantly evolving. Even the United States has recently changed its own policies regarding International Securities Class Actions. In the case Morrison V. National Australia Bank, the court ruled that securities traded on foreign exchanges are no longer within U.S. jurisdiction. As a result, damaged investors are increasingly forced to seek foreign jurisdictions as a venue for their complaints. In order to recover damages, investors will need comprehensive coverage of foreign jurisdictions and each jurisdiction’s legal mechanisms for handling group actions.
Many of these countries do not allow class actions as defined by U.S. law, but have other similar vehicles that investors can employ. A common vehicle is referred to as “joinder of claims”, in which each claimant must take legal action against the defendant individually. Then, similar cases are subsequently consolidated by the courts. Some countries, like Australia, allow classes to be organized and represented by third party investor services groups, which front the retainer fee and then take a contingency on the settlement.
Internationally, courts are shifting to provide investors with legitimate recourse in the event of securities fraud. In countries where class actions on behalf of an unknown number of claimants are allowed, oftentimes claimants must opt-in to the class to receive their settlement. (In the U.S., claimants must opt-out if they do not agree with the settlement.) In other opt-out jurisdictions, like Canada, certain cases can be restricted to residents of a particular province, whereas other cases are open to all investors, both Canadian and international.
The distinction should be made between cases involving shares traded on foreign exchanges that are tried in foreign jurisdictions (described above) and foreign securities that are traded on U.S. exchanges in the form of American Depository Receipts (ADRs). ADRs are traded on U.S. exchanges and litigated in U.S. courts; therefore, they are treated as domestic cases. This type of case represents a growing portion of overall settlements. This is largely a result of cases being brought against Chinese companies that fall into U.S. court jurisdiction because their ADRs are listed on U.S. exchanges. The list of countries where companies have securities represented by ADRs on U.S. exchanges is much more extensive than the one listed above.
Financial Recovery Technologies (FRT) maintains a proprietary database of pending, current, and past securities class action lawsuits and settlements, both domestically and internationally. FRT monitors all class action activity by accessing internal and third-party data sources and matches those litigations with institutional investors’ historical transaction data. If your firm held positions of an international organization, FRT has the ability to identify and file for each U.S. and international securities class action lawsuit in which your firm is eligible to recover settlement dollars.
For a more in depth look, read Designing a New Playbook for the New Paradigm: Global Securities Litigation and Regulation, as posted on Kevin LaCroix’s The D&O Diary.
Contact FRT today to learn more about how we can be of service to your organization.
Posted by Chris Higgins on Thu, Nov 17, 2011 @ 02:12 PM
Increased pressure placed on investment advisor compliance officers
Chief compliance officers (CCO) of broker-dealers and investment advisory firms have seen increased scrutiny in recent years. In the wake of the Dodd-Frank Act, government regulators have increased their oversight of investment firms. The Securities Exchange Commission (SEC) and the Financial Regulation Authority (FINRA) have begun holding CCOs personally liable for failure to comply with new regulations, resulting in disciplinary action against CCOs and their firms.
One major area of compliance that regulators have focused on is due diligence. CCOs and their investment firms have a responsibility to their clients. Firms must offer products and conduct business in a way that reflects their clients’ best interest. While due diligence often refers to reviewing aspects of a product offering, compliance officers also accountable for due diligence in other areas. For example, overlooking the potential benefit of filing for securities class action settlements on behalf of their clients, or ignoring class actions all together, could leave CCOs open to inquiry.
It is important to have a plan in place for addressing securities class actions. Not only is it in your clients’ best interest, but it can provide real value to the firm. Often times, money that is recovered through securities class action settlements can make up for recent portfolio losses. If you are unfamiliar how to approach class action recoveries, consider the services of a securities class action settlement services like Financial Recovery Technologies (FRT). FRT can help your firm identify and recover all settlement funds that it is entitled to while addressing one due diligence issue that your firm’s compliance officer will no longer have to worry about.
Click here to read the Integrity Research article “The Stakes are Getting Higher for CCOs”.
Click here for a more in depth assessment in the study “The Girl with the SEC/FINRA Tattoo: Disciplinary Actions Taken Against Chief Compliance Officers (November 2010 – June 2011)” by Brian L. Rubin and Katherine L. Kelly.
Posted by Chris Higgins on Wed, Nov 02, 2011 @ 12:45 PM
More than just stock in class action recoveries
There is a common misconception among institutional investors that only positions in common or preferred stocks are eligible to participate in securities class action settlements. In fact, class action litigation against an organization often takes into account all securities associated with that organization. In addition to common and preferred stock, derivatives, credit positions, debt positions, mutual funds, shorts, options, and index futures are all examples of securities that may be included in a securities class action settlement, and therefore, offer the opportunity for investors to recover funds.
As a result, pursuing securities class action recoveries presents an opportunity for all types of investors to their fair share of available settlement dollars. Based on data compiled by Financial Recovery Technologies (FRT), almost $20 billion has been disbursed in recent years involving more than 110 cases in which the associated securities ranged beyond common or preferred stock. FRT estimates that an additional $7 billion will be made available in the near future from settled cases involving less traditional security vehicles that have yet to be disbursed. In these cases, more than 20,000 different securities are applicable to the expected disbursements. Many additional cases that FRT is currently tracking have been filed with pending settlements. All told, the opportunity for securities class action recoveries for institutional investors that concentrate on credit, debt, and other classes of securities is unquestionably significant.
Our guidance to such firms is simple: do not assume that pursuing class action settlements is immaterial to your firm. By comparing your firm’s historical transactions against a proprietary database of cases and eligible security identifiers, FRT can provide you with a definitive assessment of the opportunity for your firm to claim funds that have been made available in class action settlements. Even if your organization does not concentrate on common or preferred stock, FRT can help you recover all of the securities class action settlement funds that you are entitled to receive.
Contact FRT today to learn more about how we can be of service to your organization.
Posted by Chris Higgins on Fri, Oct 21, 2011 @ 12:49 PM
The scope of securities class action lawsuit filings continued to expand through the third quarter of 2011, with a concentration on two areas in particular. The two most significant factors affecting securities class action litigation were merger-related lawsuits and lawsuits involving U.S.-listed Chinese companies. There were 154 federal securities lawsuits filed through the end of September, and over half of those involved mergers and Chinese companies listed in the U.S., according to Kevin LaCroix of the D&O Diary.
Another interesting trend highlights the diversity of the types of organizations that are involved in securities litigations. While recent years have seen lawsuits concentrated in the financial industry, companies associated with close to 100 different industries (according to Standard Industrial Classification, or SIC) have seen litigation pursued against them through the third quarter of this year. The industries with the largest number of securities lawsuit filings include semiconductor and related devices, prepackaged software, pharmaceutical preparations, and crude petroleum and natural gas.
Through the end of September of this year, federal securities class actions have been pursued in 45 different federal district courts. Interestingly, two specific courts have accounted for more than half of the overall securities class action filings. Those courts are the Southern District of New York and the Central District of California. This trend is supported by the increase in non-U.S. companies, with the majority of those lawsuits involving U.S.-listed Chinese companies.
As the instances of securities class action litigations continue to build, it becomes increasingly important to have a reliable source for tracking and filing for each lawsuit. Every case that is missed or is incorrectly filed for will result in forfeited recovery dollars for your firm. By partnering with Financial Recovery Technologies (FRT), you can rest assured that you are receiving the most comprehensive range of securities class action filing services available.
It is not too late to get a grasp on securities class actions. Contact FRT today to find out more about our proprietary technology platform and processes that will help ensure your firm recovers all the settlement funds that you are entitled to receive.
Read Kevin LaCroix’s article for a more complete breakdown of securities class action trends.
Posted by Chris Higgins on Fri, Oct 07, 2011 @ 01:55 PM
Staying on top of securities class action claim settlements can be frustrating and labor intensive. That task becomes even more confounding in today’s environment of corporate restructuring and mergers & acquisitions. When two companies merge, or one acquires another, there is often a reassignment of the companies’ CUSIPs and ticker symbols. When this happens, it can be extremely difficult to identify eligibility and keep track of securities class action filings.
The challenge with mergers and name changes is being able to recognize all relevant transactions as they relate to securities litigation. When organizations trigger a change in their ticker symbols due to a merger, acquisition, or name change, it is likely that a CUSIP tied to one security offering could be referenced by more than one ticker symbol.
Likewise, one ticker symbol might reference multiple CUSIPs if ownership of that particular ticker had changed over a period of time. To make matters worse, the same ticker could even reference different securities on different exchanges within the US at the same time. Without a comprehensive map detailing how a security has been identified over time, it would be easy to miss transactions relevant to a certain securities class action settlement claim, which would result in settlement funds being forfeited.
For example, when Bank of America acquired Countrywide in 2008 (an event that recently resulted in an $8.5 billion class action settlement), there were over 12,000 different CUSIPs related to Countrywide Mortgage Securitization Trusts. All of these CUSIPs are relevant to the class action settlement and must be tracked in order to ensure full compensation for investors in those securities. Making matters even more complex, there are several other recent class actions involving Bank of America and Countrywide. In situations like these, piecing together all of the security identifiers and how they are relevant to each specific litigation can become a full-time job.
Fortunately, Financial Recovery Technologies (FRT) is dedicated to delivering the most comprehensive range of securities class action filing services available. FRT proactively scours industry data sources in order to identify all cases and relevant securities identifiers to ensure that every possible filing can be made. Working from client trading data, Financial Recovery Technologies is able to identify all eligible security positions to ensure that your firm capitalizes on all possible settlement funds.
Contact FRT today so we can take the confusion out of securities class actions and collect the valuable recovery dollars that you are entitled to receive.
Posted by Chris Higgins on Fri, Sep 23, 2011 @ 01:11 PM
On the heels of an exceptional outing in August, Team FRT decided to welcome a new team member to its ranks by revisiting the famous Boston culinary landmark Boston Speeds Famous Hot Dog Wagon.
The World Record Attempt
Ever in search of new challenges to tackle, the team decided to throw caution to the wind and attempt to break the current Boston Speeds record for the most hot dogs consumed in the shortest amount of time.
While other lesser purveyors of the popular tube steak offer 2 oz. and 3 oz. sized dogs, Boston Speeds is in a weight class all of its own. Speed’s serves 8 oz. of custom-made, locally-marinated meatiness, topped and surrounded by what we estimate to be at least another half-pound of fresh bun and delicious toppings. This makes consuming more than one of these giant puppies quite a feat. Prior to FRT’s visit, the world record at Speed’s was 3 “Loaded” dogs (with all the toppings) in 10 minutes flat. When we announced we were going to try and break the record, Chef Greg Gale just shook his head and smiled.
What he didn’t know is that we had a secret weapon. A guy we like to call “The Champ”, who is an eating machine. After carefully planning his approach (and letting the steaming hot dogs cool a bit), The Champ launched a full-frontal assault on a 48” long row of Speed’s famous Fully Loaded dogs. Seven minutes and 32 seconds later, the record was completely shattered; The Champ had plowed through 3 whole dogs. Having broken the speed record, The Champ readied himself to consume a fourth. However, taking a brief breather turned out to be a mistake. Despite ample encouragement from his teammates, The Champ balked at tackling a fourth, instead throwing down the gauntlet and declaring “I’d like to see someone try to take down a fourth!”
Scaling New Heights
Never satisfied with a single triumph and relentlessly pursuing continuous improvement, the team also set out to best its own record in total consumption of the delicious Speed’s Hot Dog.
Ever competitive, the team members also jockeyed for position amongst themselves, vying for a top spot behind The Champ in terms of their Height to Dog ratio.
Needless to say, Team FRT always achieves what it sets out to do, and the results (shown below) are nothing short of staggering (and yes, the team did stagger away from the Speed’s stand in the end.)
The Results: A Second Record is Broken
With the previous team total hanging at a record 16 dogs and a respectable average of 1.3 dogs per person, Team FRT had its work cut out to surpass its own record.
Needless to say, bolstered by The Champ’s unprecedented performance, the team was up for the challenge.
More than half the team consumed more than 20% of their own height in Speed’s famous dogs, with The Champ shattering all semblance of normalcy by consuming more than 50% of his own length in grilled goodness. The next two individuals to place in the competition consumed a total of four and a quarter dogs, handily beating back any other riff-raff that was hanging around the Speed’s stand.
So what’s next you might ask?
Does The Champ gear up to push the record to four colossal servings?
Does the team try and collectively break the 20 dog barrier?
Only time will tell.
About Boston Speeds Famous Hot Dog Wagon:
Boston Speeds Famous Hot Dog Wagon serves up hot dogs that are produced under a special recipe by a Connecticut-based specialty meats company exclusively for this now famous institution. Speed’s hot dogs are then marinated in a special brine to further expand and enhance the flavor of what many consider to be the world’s best hot dog. Finally, “loaded” dogs combine Speed’s own toppings, which are: a special mustard, a BBQ sauce, a relish, onions and a bean-less chili sauce.
For those who have not experienced a Speeds dog, you need not take our word for how outstanding these dogs are, just check out some of the accolades that others have bestowed on Speeds:
The Wall Street Journal: America’s Top Dog
Boston Speed Dog: A Rite of Passage
Traveling Feast: The Best Hot Dog in the Country
VendrTV’s review: Speed’s Dogs
Patriot Ledger: Quincy man makes hot dogs considered best in the nation
Boston Globe: Warren Buffett sure likes Boston Speed Dog
Posted by Chris Higgins on Fri, Sep 16, 2011 @ 03:35 PM
In speaking with prospective clients, we often hear them say “the only people who get any real money from class action lawsuits are the law firms”, incorrectly concluding that there is no “real money” for the average claimant. Unfortunately, they are sometimes right, and at other times they are way off.
So, how does one know which cases are the best ones to respond to? The answer largely is that you don’t know; the best you can do is make an “educated gamble”.
Here’s why: the “payout” to each eligible investor depends on a number of variables. These include:
- The size of your investment in the relevant security(s) in the relevant timeframe
- The size of the settlement pool (i.e., how much was allocated in total to affected investors)
- The number of other investors who file claims (and the size of their investments)
- The amount of “recognized loss” that you have in those security(s)
“Can you give me a ‘ballpark’ of what to expect?” is what we often hear in response. The answer: anywhere from a penny to 100 cents on the dollar. And that’s not a flip answer. As the chart below shows, the actual data does range across the entire curve, albeit with more being below 50% than above.
Source: Financial Recovery Technologies, analysis of historical data.
“So can we just focus on filing the ‘big ones’ and skip the rest?”, you might ask. The answer is an emphatic “No”. Often, the large, well-publicized cases have many people who file claims and/or the average investment is small in size relative to the total pool. Sometimes, the “big windfalls” come from the most unexpected places. In fact, some recent examples of high payout settlements that have resulted in large recoveries for our clients include:
- Kinder Morgan, Inc.
- Refco Finance Holdings, Inc.
- Brocade Communications Systems, Inc.
- Petco Animal Supplies, Inc.
- American Tower Corp.
So what’s the best approach? In the end the conclusion is simple: don’t forego found money by walking away from the table. Instead, make sure you have a seat and can sweep up your winnings every hand (without having to ante), as every once in a while the pot is huge.
How do you do this? First, make sure your overhead cost for filing claims is low. Second, submit your claim for all cases in which you are eligible to file a claim. Then sit back and wait for the checks to come in.
Contact FRT today to find out how we can handle your claims filings with our comprehensive service to help ensure your firm recovers all the settlement funds that you are entitled to receive.