Pension funds lose out on what’s rightfully theirs
2 March 2009, 2:31 pmEuropean institutional investors have lost out on nearly £3.6bn between 2000 and 2007 by failing to participate in US securities class actions.
A report from GOAL Group, a European withholding tax and class action service specialist, has revealed that since 2000 institutional investors’ non-participation in US securities class actions resulted in billions being left on the table, a significant proportion being attributable to European pension funds.
And while previous class action lawsuits were primarily related to corporate governance scandals such as Enron, there has now been a surge of class action lawsuits inspired by the international credit crisis.
Stephen Everard, managing director of GOAL Group explained: “Although the Sarbanes-Oxley Act and European equivalents are undoubtedly suppressing the possibility of further Enrons and Parmalats, new factors have arisen in the financial and corporate markets where class actions are being used to try and claim compensation for shareholders and investors. We are currently seeing a surge of class action lawsuits inspired by the international credit crisis”.
But while lawsuits may have increased in this area, said Everard, many pension funds are still failing to make claims for what’s rightfully theirs. “Pension funds are more aware that they should be getting involved in class actions, but this doesn’t mean they are doing anything about it. Previously, perhaps, they aware afraid to have their names associated with corporate scandals or mismanagement, and so were reluctant to get involved, especially as a lead plaintiff, but there is a whole raft of cases now arising off the back of the sub-prime crisis and there is less stigma attached to these cases as no-one could have seen it coming’’.
Commenting on whether European pension funds are actually under a duty to get involved, Caroline Goodman, managing director of Institutional Protection Services, said: “It is generally accepted in Europe that investors don’t have a duty to get actively involved in the litigation per se, but they do have fiduciary duty to know where their investments are impacted by securities class actions and to claim their part of the settlement pool (assuming it is cost effective to do so) in order to both protect and maximise their beneficiaries and shareholders’ assets.’’
