Non-US securities class actions settlements to reach USD8.3bn per year by 2020
Settlements in securities class actions outside the US will rise to USD8.3bn per year by 2020, according to a study by class actions services specialist Goal Group.
The study also identifies that if non-participation rates seen in US class actions are experienced in non-US activity, by the end of the decade USD2.02bn of investors’ rightful returns will be left unreclaimed each year.
Furthermore, the report also warns that because non-US legislatures require participants to register at the beginning of a case, investors need to participate now to receive their rightful returns. Any level of non-participation presents fiduciaries, such as fund managers and custodians, with a potential legal risk. Experience in the US, along with emerging contractual obligations, suggests that fiduciaries may be sued if they do not ensure investors participate in class actions to recoup a proportion of their investment losses.
This is a wake-up call to fiduciaries, as growth in non-US collective actions and evidence that some custodians are restricting the geography of their class action service level, indicate that non-participation rates are likely to be at least at current US case levels, and probably considerably higher. Moreover, evidence is emerging that funds are now including the responsibility for class action identification and participation in contractual agreements with their custodians.
Stephen Everard, chief executive of Goal Group, comments, “Until recently, the main focus of securities class actions was on the US as the most developed legislature in this respect. However, class action growth outside the US is now increasing rapidly, and is predicted to mirror the growth of the US class action scene in the early part of the 21st century. The root of this international diversification seems to have been a combination of restrictions on jurisdiction definitions in the US Federal courts, along with a growing desire to develop domestic class action procedures in many countries around the globe. Moreover, certain legislatures – currently The Netherlands and Canada – have defined and admitted the idea of a global ‘class’ where non-US investors in shares listed on a non-US exchange can pursue their securities class actions in those countries’ courts. There is no viable excuse for non-participation as a number of specialist service providers can now perform this function at relatively low cost.”
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