Securities Class Action FAQ

1. What is a securities class action?

A securities class action is a lawsuit brought on behalf of a group of investors who transacted in a company’s securities during a defined period, called the “class period.” Securities class action lawsuits typically allege that the company and senior executives misled investors by making false or misleading statements, or failed to disclose important information, and that the price of the company’s securities was artificially inflated during the class period as a result. These types of cases usually include allegations that the price of the company’s securities declined once investors learned the truth, causing damage to investors. In a class action, one case is brought on behalf of everyone who transacted in the security instead of each investor filing a separate lawsuit.

2. What is a Lead Plaintiff?

A lead plaintiff is the investor (or group of investors) the court appoints to represent the class and direct the litigation. Under the Private Securities Litigation Reform Act of 1995 (PSLRA), any class member may ask the court to be appointed as the lead plaintiff within 60 days after notice of the case is published (usually by press release by the law firm representing the plaintiff that filed the initial complaint). Pursuant to the PSLRA, the court presumes that the investor that files a timely motion or complaint, who also possesses the largest financial interest in the relief sought by the class, and meets the requirements of Federal Rule of Civil Procedure 23 (in particular, the typicality and adequacy requirements), is the most adequate plaintiff.

The lead plaintiff selects the lawyers for the class (also called lead counsel), subject to court approval, and oversees the litigation and counsel on behalf of the other absent class members.

Only one investor or group of investors is appointed as lead plaintiff in each case. Investors do not have to “sign up” or “join” a class action when it is filed, or be appointed as a lead plaintiff, to ultimately be eligible to file a claim in connection with a class action settlement.

3. What is the difference between a class member and a lead plaintiff?

A class member is an investor who transacted in the company’s securities during the class period and falls within the class definition ordered by the court. Class members generally do not need to take affirmative steps to be part of the case while it is pending before a settlement or resolution is reached. Class members generally do not actively participate in a case while it is pending. If the case settles or results in a favorable judgment, class members will be notified of the opportunity to file a claim to receive their pro rata share of the recovery. Class members should keep copies of trade confirmations to evidence future claims.

By contrast, the lead plaintiff is a class member who opted to lead the case on behalf of all other class members. The lead plaintiff must satisfy the statutory criteria for appointment and actively participates in the case. Like class members, a lead plaintiff is also entitled to its pro-rata share of any class recovery, calculated according to the court-approved plan of allocation. Lead plaintiffs may also apply to the court for an award of reasonable costs and expenses (including lost wages) directly relating to their representation of the class.

4. How do I know if I may qualify as part of the class?

You may be a class member if you transacted in the securities at issue during the class period and suffered damage as alleged in the complaint. The contours of the case are set forth in the complaint and published notice for each case. Because the class definition can change as a case proceeds, the final determination is made when the court certifies the class or approves a settlement.

5. Can international investors participate?

What matters is where the securities were purchased, not where you live. Under the U.S. Supreme Court’s 2010 decision in Morrison v. National Australia Bank, the U.S. securities laws apply to securities bought or sold on a U.S. exchange (such as the New York Stock Exchange or Nasdaq) or in other transactions that take place in the United States. If you are unsure which market your purchase took place on, your brokerage confirmation or account statement will typically show the exchange or the security’s ticker symbol.

6. Do I have to sell my shares?

Class membership is generally based on the nature of the claims alleged in the case. Some cases are brought on behalf of investors who purchased securities during a class period; some are brought on behalf of sellers during the class period; and others are brought on behalf of holders eligible to vote on a proxy statement. Investors should review the complaint allegations or class action notice sent in connection with a settlement to ascertain the contours of the case.

7. Can I participate if I purchased through my IRA, retirement account, or brokerage account?

Securities held in an IRA, 401(k), or standard brokerage account generally do not affect eligibility to participate in a settlement.

8. Can I participate if I received company stock through my employment?

The complaint and/or class notice will define the contours of class membership. Depending on the particular case and class definition, covered acquisitions may include or exclude shares received through restricted stock, vested restricted stock units, exercised stock options, an employee stock purchase plan, stock-based compensation, or certain retirement-plan transactions. If you are unsure, you should consult a lawyer to determine whether your specific transactions qualify you for class membership.

9. How much does it cost to speak with an attorney?

There is no charge to contact us to discuss a case or have your transactions reviewed. Securities class actions are generally handled on a contingency fee basis, meaning attorneys’ fees and litigation expenses are paid only if the case results in a recovery, and only for the amount the court approves. Lead plaintiffs and class members are never billed directly.

10. When will I receive my settlement payment?

Securities class actions typically take several years to resolve. If a case settles, the court will order a notice to be sent to class members. Class members will then need to review and complete the court-ordered claim form by the claim deadline to be eligible to participate in the settlement. Pro rata payments are distributed after the court grants final approval to the settlement, after any appeals are resolved, and after all claims have been processed. Depending on the nature of the settlement and size of the class, that process can take between several months to more than a year.

11. What documents should I keep or provide?

Investors should generally maintain records evidencing the securities transactions. Additional evidence may be required if you are actively involved in a case and will be identified in consultation with an attorney.

DISCLAIMERS: These FAQ do not constitute legal advice. These FAQ do not create an attorney-client relationship. These FAQ do not guarantee that you are a member of any class or will be eligible to participate in any recovery. Information submitted through this website, e-mail or telephone will not be treated as confidential or privileged.