When a type of securities fraud is committed that artificially inflates or deflates the stock’s value, a securities class action lawsuit is filed by and on behalf of all investors who bought shares of the same stock or security and lost money on their investment.
Typically, an investor files the case on their own and then represents any other investors who owned shares of the stock or other impacted security when the fraud was perpetrated.
These legal battles frequently last a few years and end in settlements, verdicts, or dismissals. If a settlement is achieved, the plaintiff stockholders in the lawsuit will normally get compensation in the form of cash or securities.
When the investing public is fully informed of the reality, the class period typically ends. A “corrective disclosure” is a speech or action that clarifies the reality of a specific claimed false statement or omission.
There is often one final corrective disclosure made during the class session, and in certain complicated cases, there are numerous partial corrective disclosures that reveal some of the truths surrounding the claimed false statements or omissions.
How Can I Join a Securities Class Action Lawsuit?
Suppose you intend to participate in a securities class action lawsuit concerning a security you hold.
In that case, you should get in touch with the legal representatives of the “representative” investor (i.e., the investor who filed the class action). It is irrelevant if you have already sold the security as long as you held it within the fraud’s time and suffered a monetary loss due to the crime.
You may want to check the Securities Class Action Clearinghouse administered by the Stanford University School of Law to see if there are any class action lawsuits regarding securities you own, or you can simply type the name of the security into a search engine to see what comes up.
What Exactly Is a “Class Period” in a Securities Action, and How Is it Established?
The time period during which it is often thought that alleged fraud or other securities law violations may have artificially inflated the price of the shares in question is known as the class period. The only parties to the class action lawsuit are those who bought the stock at this time.
After thorough research and investigation, the plaintiffs’ counsel established the class period. As new material is revealed during the discovery phase of the action, the class period may occasionally alter.
A “Lead Plaintiff” Is What?
A Lead Plaintiff is a representative party or individual chosen by the court to represent the other class members and carry out their legal obligations. A court must decide that the proposed Lead Plaintiff’s claims are typical of those of the other class members in order to designate the Lead Plaintiff and that the Lead Plaintiff will effectively represent the interests of the whole class.
More than one class member may act as the lead plaintiff in certain situations. The litigation’s progress and direction are within the Lead Plaintiff’s authority.
Who Is Chosen By the Court to Be the Lead Plaintiff?
According to the Private Securities Act of 1995, the person or group of people who, in the opinion of the court, has the greatest financial interest in the relief requested by the class is the most suitable Lead Plaintiff. Courts may decide on the “greatest financial interest” in a number of ways.
Some courts choose the Lead Plaintiff based on the dollar amount of the alleged loss due to securities law violations, while others choose the Lead Plaintiff based on the percentage of the alleged loss in net worth. Additionally, a number of organizations or people may be chosen to act as “Co-Lead Plaintiffs,” depending on the situation.
What Exactly Is the “Lead Plaintiff Deadline?”
Applications for Lead Plaintiff in a federal securities fraud case must be submitted within 60 days of the first class action complaint being filed. The deadline for applications is carefully adhered to.
I Failed to Meet the Lead Plaintiff’s 60-Day Deadline. Now, What Should I Do?
You automatically become a class action member if you acquired your shares within the class period and incurred losses. Only individuals wishing to be the Lead Plaintiff are subject to the sixty-day deadline.
What Sort of Recovery Should I Anticipate for a Securities Class Action Claim?
It is impossible to ascertain what recovery might be achievable, whether by settlement or following judgment at trial until the case is well underway. Securities cases that are not immediately dismissed from court for legal grounds typically settle.
A settlement typically entails the payment of money, shares, or a mix of both to a common fund that will be divided among the class in proportion to the amount each class member has lost.
The amount of loss attributable to the illegal behavior, minus attorney’s fees and costs, constitutes the maximum recoverable amount, which is infrequently reached.
How Long Does a Securities Class Action Typically Take to Settle or Resolve?
Usually, two to three years have passed from the initial lawsuit being filed until the matter is resolved—either through a settlement fund being awarded to stockholders, a judgment, or dismissal. However, this is simply a rough estimate; some instances have taken longer, particularly when there are appeals, while others have resolved much faster.
Can I Still Be a Class Member if I Sell My Shares in the Firm Being Sued?
Yes. You do not need to continue holding the stock after the class period has ended to participate in the lawsuit.
What Is the Best Form of Proof that I Hold Shares of Stock, and Do I Need it?
The confirmation papers you received when you bought the stock are the best proof of ownership, but you can also use your brokerage statements of account, which show when and how much you paid for the shares.
After the matter has been handled, you might need to provide the claims administrator with these documents, so make sure to store them safely. You’ll get a letter in the mail when you need to deliver these documents.
Do I Have to Get in Touch with Every Legal Firm that has Filed a Lawsuit Over the Same Fundamental Securities Violation?
No. You shouldn’t try to hire different law firms to represent you for the same claim since the courts will eventually combine lawsuits that have been filed on behalf of a class. Retaining more than one law firm will not increase the size of any recovery.
I am Merely a Modest Investor. What Ought I Do?
Your rights as a small investor are probably already covered by individuals who have suffered bigger losses and have previously brought a securities class action.
If I Join a Securities Class Action, Should I Get Legal Advice?
Even while it is not required that you have legal representation if you are not the class representative, you might want to speak with a securities lawyer with knowledge of securities laws and class actions so that you are aware of what you are getting into.
Your attorney may walk you through the class action proceedings and explain how much money you would get if the verdict or settlement is in your favor.