What are Securities Class Action Lawsuits?

What are Class Action Lawsuits?

A class action is a type of lawsuit in which one or several persons sue on behalf of a larger group of persons (or "class").

In class action lawsuits, members of the class have suffered the same wrong at the hands of the defendant. By consolidating all the claims in a single group ("class"), it becomes practicable to sue the defendant. Without consolidating the claims, it may not be practical to launch a lawsuit, as there may be too many participants to bring the case before a court, or the cost of bring a case to court may out weight any damages suffered.

What are some types of class action lawsuits?

Examples of class actions:

• employees subjected to unfair employment practices, such as racial, age or gender discrimination
• consumers who purchased the same defective product and were harmed by it
• investors who suffered from corporate fraud committed, through purchases or sale of stocks and other securities.

What are securities class action lawsuits?

A securities class action, or securities fraud class action, is a lawsuit filed by investors who bought or sold a company’s securities within a specific period of time (known as a “class period”) and suffered economic injury as a result of violations of the securities laws. In cases involving misleading statements or omissions, a class period generally starts when a company makes an untrue statement of material fact about the company or fails to disclose a material fact necessary to render other statements not misleading. The class period generally ends when the truth is fully disclosed to the investing public.

For example, you may have bought 100 shares of ABC Company at $30 per share. However, it turns out that ABC’s financial statements omitted or intentionally withheld important information about the business. As a result, when the truth was finally revealed, the share price plunges to $15 per share, causing you to suffer a loss on your 100 shares.

What is a securities class action settlement?

When the defendant is sued, they may choose to settle the lawsuit. In this scenario, the defendant will usually agree to put aside a sum of money into a settlement fund to compensate the class members. The court will direct the class lawyers to send notices of the settlement to all members of the class, setting out the details of the proposed settlement, and providing them with instructions on how to participate in the settlement, if they so choose.

Participation usually allows the class members to receive some monetary compensation from the settlement fund, based on the damages they have suffered.

Why should I participate in a securities class action settlement?

If you receive a class action notice, and you discover that you are eligible to participate, you should consider participating in the settlement.

It is your chance to obtain some compensation from those who have caused the losses you suffered from your stock (or other securities) purchases. As often is the case, your holdings may be too small for you to sue the defendants directly.

Participation in a settlement usually requires very little effort from you, beyond sending in a completed claim form before the deadline, with any supporting documentation required. You need not participate at the start of the class action, and action is usually only required when there is a chance to receive compensation.

By participating in the settlement, you are cannot sue the defendant for the same reason later.

You will be given the chance to opt out of the settlement, if for example, you plan to sue the defendant yourself, or if you disagree with the lawsuit.

None of the information above should be construed as legal advice, or advice of any sort. Please consult your own lawyer on any legal matter. No responsibility will be borne by the owner of this log, if you should take any action based on the information provided.