Australian superannuation funds lose out on AU$3.5 bn in class actions
March 17 2010, 10:11 amNew report from GOAL Group highlights missed opportunity for superannuation funds to participate in US securities class actions
Following on from GOAL’s European study published in early 2008, a new report from GOAL Group, the leading global class action services specialist, shows that between 2007 and 2009 Australian superannuation funds’ non-participation in US securities class actions resulted in over AU$3.5 billion being left on the table. Some AU$1.8 billion of this total can be attributed to Australian corporate & industry superannuation funds, whilst AU$1.7 billion originates from Australia’s public sector superannuation funds. The report found that over AU$110 billion has been lost by Australian superannuation funds on their investments in this period, acting as a wake-up call to those currently foregoing their legal right to claim damages through the US. With the onset of the financial markets crisis – the collapse of the subprime mortgage market and the emergence of fraudulent Ponzi schemes – Australian superannuation funds’ awareness of class actions has risen significantly.
There is a substantial opportunity for superannuation funds to continue to reduce the pensions gap through class actions, and the recent abundance of high-profile cases in Australia and globally has helped raise awareness of this. Since the first local large-scale shareholder class action in 1999 – against GIO Australia Holdings, thirty-one additional securities class actions have been filed, with the number of filings steadily increasing from year to year. This is expected to expand further in the U.S courts, predominantly due to the high levels of corporate fraud and mismanagement exposure Australian superannuation funds and investors have undergone on the US markets. With a large proportion of Australia’s AU$1 trillion superannuation industry exposed to US markets [1], superannuation funds are prone to loss through fraud, negligence or general lack of corporate governance on the US markets. Australian superannuation funds’ investments are placed in many areas open to class actions, and a number of funds are currently in negotiations with class action service specialists in order to recoup their share of the huge AU$78 billion lost in Madoff Ponzi schemes.
If investors and fund managers are to recoup escalating losses and are to be included in the approaching steady succession of class action cases, both in US and Australian courts, now is the time to become actively involved in the filing and participation process. However, keeping track of the opportunities to make a claim and the processes required to do so successfully, can be a complicated and daunting task – with many investors mistakenly believing that the cost and time involved will outweigh the benefits. In fact, specialist services are now available to handle the class action participation process, often on a no-win, no-fee basis.
Stephen Everard, Managing Director, GOAL Group, comments, “It is the judgement of the legal profession that there is a clear duty of care for institutional investors to register claims on behalf of their clients. Our research shows that aside from fulfilling corporate governance responsibilities, there is also a substantial need for Australian superannuation funds to help plug the escalating pensions gap. An alarming proportion of class action settlements nevertheless remain unclaimed despite the recent proliferation of high-profile cases.
“Although the Sarbanes-Oxley Act in the US and the Corporate Law Economic Reform Program (CLERP 9) Act in Australia have suppressed the possibility of further Enrons, Worldcoms and Parmalats occuring, the international credit crisis is continuing to lead to a steady stream of class action lawsuits affecting superannuation fund investments, the resolution of which will take anywhere between five and seven years. If recent cases such as the RBS class action which involves Dutch, U.K and several other non-US pension funds lead to resolution, then it is likely to see the largest settlement ever in the history of US securities litigation, with payouts eclipsing even the Enron case.
“With the financial markets crisis set to lead to a steady stream of smaller cases, the clear message is that all Australian superannuation funds should be taking immediate action in order to recoup escalating losses on an ongoing basis in order to ensure their beneficiaries’ interests are properly safeguarded in the future. It is true that participating in a class action requires timely and accurate information about the relative merits and procedural processes, and time and resources to review and evaluate relevant settlement provisions. Investors must then cross-reference these outputs against extensive individual trading activity data and compile and submit the often complex paperwork necessary to make a valid claim.
“But outsourced, specialist automated services are available on the market to process class action claims without incurring high expense, often granted on a no-win, no-fee basis. Those funds best placed to emerge from the downturn as winners will be those making the most of such services.”
Methodology
Publicly available data sources on class action settlements were combined with GOAL Group’s own proprietary datasets in order to quantify the levels of loss suffered by Australian public, corporate and industry superannuation funds and in order to determine how much was left unreclaimed through non participation in US securities class actions between 2007 and 2009.
[1] The Age – Business Day ‘Plan for locals to join Madoff class actions’, August 24 2009
