In the context of our representation of institutional investors, our experience reveals that they have been confronting an increasingly difficult process in recovering their losses from alleged violations of securities laws. These are among the developments:
- The Morrison decision has insulated many large companies in which investors have sustained losses from Federal Securities Laws claims. While certain avenues to seek redress in foreign jurisdictions have improved, there are still obstacles in many foreign jurisdictions. Alternatively, filing a separate action in U.S. courts – without the benefit of Federal securities claims – has its own set of issues.
- The claims process itself has become more adversarial. Electronic filing has enabled claims administrators to be more diligent in rejecting claims or challenging claims for deficiencies. Deadlines have become tighter. Failure to cure deficiencies can substantially reduce the value of a claim if not eliminate it. In addition, counsel for defendants are sometimes participating in the claims process with the intent to reduce valid claims to the smallest number possible.
- Institutions are solicited to opt out of various class actions. Opt out proposals require careful analysis not only of the merits of the proposed complaint but also of the institutions’ own transactions. While the solicitation may be characterized as a “prudent way” to “maximize recovery,” following some of these proposals could place an institution at risk.
- Institutions should also be aware of the various objections to settlements in which they may be class members. Some objections – if allowed – would enhance shareholder recovery. Others are without merit and drain the settlement fund.