Securities litigation can be a complicated process, and some attorneys specialize in this area of study for years.
There are often high stakes involved when securities litigation occurs.
If a case is successful, the corporation in question may have to pay restitution to investors.
That’s why it’s important for investors to know what this process means for them.
What to Know About Securities Litigation
As an investor, it’s best to get informed about what securities litigation entails so that you can receive any compensation to which you are entitled.
These are some of the reasons that securities litigation may occur:
- There was a change in auditors or earnings were restated;
- The actual performance didn’t meet the estimates of analysts;
- Stock options were backdated;
- The corporation declared bankruptcy;
- The company’s management made significant decisions like mergers and acquisitions;
- There is concern about the validity of projections surrounding the investment;
- There is concern about insider trading.
In general, attorneys must prove that the corporation knowingly used misinformation to defraud investors or that the corporation broke securities laws.
Lawsuits Are Brought to Court
When a class-action lawsuit occurs on behalf of investors, the case is heard in state or federal court.
Each class action lawsuit must have a start and end date for when investors purchased or sold their stocks.
Any investor who engaged in the purchasing or selling of stocks within this time frame may be eligible for a judgment.
It’s common for the same events to cause multiple lawsuits to be filed by many different plaintiffs.
The claim is that investors have suffered economic losses because of the illegal actions of the company.
When multiple plaintiffs come forward with lawsuits regarding the same events, the court will typically consolidate them with a lead plaintiff.
This happens when the case is branded as a class-action lawsuit.
Investor Notification Typically Occurs
You don’t have to watch your stock holdings like a hawk to see whether you are eligible for compensation.
Usually, the investors will be notified if they are eligible to participate in the lawsuit.
This notification occurs after the judge determines that the filings constitute a class-action case.
The notice will usually come in the mail to whatever address is on file for the plaintiff.
The return address will usually be the law firm representing the plaintiffs.
You do not typically need to take action if you have been identified as a member of a class-action lawsuit.
If you do have questions about your involvement, you should ask the law firm in charge of the case.
You May Opt-Out
Investors might choose to opt-out of a class-action lawsuit. To do this, you’ll usually need to submit a form indicating that you are opting out.
Some reasons that investors might opt-out of a class-action suit include:
- They want to pursue individual action instead;
- They have unique circumstances that make them different from the other plaintiffs;
- They believe an individual action will provide more relief than a class judgment.
If you do partake in a class-action lawsuit, you will generally not be allowed to file an individual lawsuit for the same events or grievances.
Because of this, you will want to carefully weigh your options and discuss your case with an attorney.
Arbitration Requires Opting Out
If you want to reach a resolution through arbitration, you’ll need to prove that you won’t participate in the class-action lawsuit.
You must agree in writing that you will not take any compensation offered through the class-action suit.
Some information about existing lawsuits can be found online.
If you are uncertain whether you’re involved in a class-action suit, you can easily find out.