Securities Class Action Lawsuits – What’s Required of me?

As an investor, you are likely at some point to discover a fattish envelope in your mailbox announcing a class action lawsuit against a company. “What am I supposed to do with this?” you may ask. The quick answer is that Rock Point has its clients covered.

Generally speaking, a class action allows a person or entity to file a lawsuit on the behalf of others who are in similar circumstances, allowing those with a relatively small loss to seek compensation when going it alone would be too costly. Securities class actions allow those who have invested in a company’s debt or equity securities to seek recovery of their economic losses caused by alleged fraud or mismanagement. Participation is limited to investors who owned securities during the period of time that the corporate actors are alleged to have engaged in wrongful conduct.

One such mailing relating to AIG, the insurance giant, came across our desks recently. We counted no fewer than 32 pages of legalese, formulas and proof of claim forms – daunting enough to discourage even the most determined of investors from seeking restitution. To make matters worse, thousands of securities class actions lawsuits are outstanding today with a settlement pipeline in the billions. Unfortunately, there is no surefire way for individual investors to learn about them. This means many missed opportunities for recovery.

Rock Point has engaged the class action services of Chicago Clearing Corporation (CCC). Unless our clients opt out, transactions in Rock Point accounts are reported to CCC, which scours the information against its database for qualifying trades and files all claim forms on our clients behalf. We note that many of these suits take years to settle. When successful, the proceeds, net of CCC’s fee, are mailed to the address on record. According to Cornerstone Research, the median settlement for securities class action lawsuits resolved between 1996 and 2011 was a shade over 3% of estimated damages.

So, our clients scan any class action mailings for a check – but otherwise rest easy!