No class action claims costing investors billions
6 December 2008, 2:45 pmAsian investors are potentially missing out on billions of dollars in payments by not participating in US securities class action litigation, said a report by Goal Group a leading withholding tax and class action services specialist.
Between 2000 and 2007, almost US$12bn in settlements to which shareholders were entitled was not claimed, and some US$1.5bn of that amount was attributable to investors in Asia. Institutional investors in Japan, Singapore and Hong Kong were the most impacted.
“Increasingly, the prevailing view is that there is a clear duty of care for institutional investors in the Far East to register claims in US courts on behalf of their clients, but our research shows that non-participation is costing investors dearly,” said Stephen Everard, managing director, GOAL Group.
“The Far East investors’ perspective merits as much attention as that of European investors, but there has been little talk of their involvement. The increasing movement in various Far East legislatures towards improved corporate governance and shareholder activism will inevitably lead to rising interest in the performance of investors’ overseas holdings.”
The average settlement in class action cases is around US$30m, but investor losses (a major factor determining settlement size) in sub-prime cases are thought to be 10 times higher than in other cases, the report said.
One of the reasons keeping regional investors away from participating was the effort involved in the process. Keeping track of the opportunities to make a claim and the processes required to do so successfully can be a complicated and daunting task – and many institutional investors believe the costs and time involved are likely to outweigh the benefits. Some 25% of claims that could be filed by entitled parties are left unprocessed.
