Australian investors miss out class actions against US companies
23 February 2010, 9:07 amAUSTRALIAN investors are missing out on billions of dollars by not taking part in class action lawsuits against mainly US companies whose managers have been guilty of improper corporate behaviour, according to a study.
Superannuation and asset managers in Australia had failed to claim a combined $3.5 billion in compensation from 2007 to 2009, said London-based Goal Group, a class action services specialist.
Of this total, $1.8bn belongs to corporate and industry superannuation funds, while $1.7bn belongs to public sector superannuation funds.
The report found that more than $110bn has been lost by Australian superannuation funds on their investments in this period, acting as a wake-up call to those now forgoing 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.
In addition, the subprime-related crisis has triggered a wave of class action lawsuits and Australian investors are likely to miss out on billions more in the coming years unless they take steps to recoup money, according to Goal Group managing director Stephen Everard.
Speaking after a round of meetings with Australian asset managers and regulators, Mr Everard said: “We’ve found that institutional investors in Australia, from large commercial retail master trusts to government sector funds that have been hard hit by their failure to take part in US securities class action litigation, are now very much aware.
“Several substantial investors have asked us for a detailed breakdown of how their portfolios may have missed out through lost opportunities to claim compensation that was rightfully theirs,” he said.
Investors typically need to register with a lead plaintiff or law firm filing a class action lawsuit, but Australian shareholders and their fund custodians have traditionally been averse to corporate confrontation or have shied away because of a perceived inability to track an often complicated claims process.
Mr Everard said institutional directors had a clear duty of care to register claims in US courts on behalf on their clients.
“Our research shows that non-participation is costing these investors dearly,” he said.
Mr Everard said that a downturn in filings in 2006 raised the possibility that shareholder class actions were on the wane.
“But we see interest in class actions as likely to expand further to failed investments in the US, specifically with funds being approached regarding their losses through investments in US Ponzi schemes.”
Last year, 32 class actions relating to subprime debt alone were filed in the US. These were mainly against mortgage companies and lenders.
“We can see 320 class actions around the world at the moment, of which 300 would be against US-based companies,” Mr Everard said.
Lawyers say the financial crisis will spawn hundreds of further class actions against institutions that have taken writedowns.
Source: Tim Blue, The Australian | Published: 22 February 2010
