Thursday, June 21, 2018

Institutional investors have fiduciary responsibility 

for worldwide claims filing


By Mike Lange, Guest Columnist

By now, most institutional investors have concluded their fiduciary duty requires filing proof of claim forms in U.S. securities class action settlements. However, many have not yet implemented similar claims filing protocols for U.S. antitrust and non-U.S./Canada securities matters. If fiduciary duty compels the former, it also requires the latter; and none require funds to become named parties to active litigation.

Custodians won’t file these claims for clients, leaving fiduciaries to either devote internal time and resources or outsource this function to third-party filers. Either way, best practices suggest that fiduciaries take steps now to ensure their funds do not miss recovery dollars for lack of submitted paperwork.

In the U.S., antitrust class actions cover investments in non-securities financial instruments. At the end of 2016, the credit default swaps (CDS) settlement distribution showed fiduciaries that these claims can yield substantial dollars. For just nine antitrust matters there is currently more than $3.7 billion – and still millions of more dollars – that may be recovered in the future from non-settling defendants. There are also more than 50 antitrust class actions in active litigation which could yield filing opportunities and substantial recoveries for years to come. 

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There is a common misconception that non-U.S./Canada securities recovery efforts require funds to be named parties in active litigation. Since 2015, roughly 100 non-U.S./Canada securities matters were pursued. More than 70 percent were in jurisdictions using ‘opt-out’ classes and/or analogous administration processes.
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Here are few examples: 

  • Australia/Israel: Roughly 30 matters were pursued in Australia and Israel. Both countries use ‘open’ or opt-out classes that like U.S. class actions, encompass all investors affected by alleged frauds during relevant time periods and/or utilize claim registration processes similar to U.S. class action administrations.

  •       Netherlands
      The five matters brought in this country fall into two categories:
  1. Collective action: These suits are prosecuted by representative plaintiffs. If they prevail on questions about defendants’ liability, they are followed by individual claim resolution procedures.
  2. Collective settlements: Dutch Foundations are special purpose entities created to litigate in their own name questions about the defendant’s liability. When settlements are reached, Dutch Foundations use claims filing and administration processes like those in the U.S. Dutch law includes other legal mechanisms that don’t require funds to be active litigants including court investigations that can be triggered by requests from at least 1 percent of company shareholders.

  • Other: Beyond these three countries, other examples of non-U.S./Canada matters that involve claim submission include regulatory enforcement resolutions with investor compensation aspects like the Tesco Comp Scheme in the UK, which resembles an SEC Fair Funds administration in the U.S.

For fiduciaries, the key is to have a system in place to identify non-U.S./Canada matters that involve claims filing, as opposed to active participation as a litigant. As with U.S. securities settlements, claims filing for U.S. antitrust class actions and non-U.S./Canada securities matters can be automated thus maximizing recovery dollars and efficiently allocating staff time and resources. 

The views expressed do not constitute research, investment advice or trade recommendations and do not necessarily represent the views of Financial Recovery Technologies or TEXPERS.

Michael Lange
About the Author
Michael Lange is counsel of securities litigation for Financial Recovery Technologies. Financial Recovery Technologies is a  technology-based services firm that helps institutional investors identify eligibility, file claims and collect funds made available in securities class action, global and antitrust settlements.

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