Four global class action challenges reshaping asset recovery
13 Nov 2024
Christi Cannon, vice president, Global Class Actions, Broadridge, puts the spotlight on four recent class action cases.
Image: Broadridge
Class actions can be incredibly complicated. In 2023, settlement trends drove complexity to unprecedented heights. The best way to grasp the impact is through the lens of real-world litigation. Taken from Broadridge's latest Global Class Actions Report, these four cases highlight critical administrative obstacles standing between custodians and maximum asset recovery.
1: Filing claims for numerous securities
A single case could involve tens of thousands of CUSIPs and ISINs. Take, for example, the Bank Bill Swap Rate (BBSW)-Based Derivatives Antitrust Settlement. The defendants allegedly coordinated manipulative Australian Prime Bank Bill transactions during the daily BBSW Fixing Window to benefit their trading positions.
Any instrument based on the BBSW or using it as a component of price was eligible for a claim. This included FX derivatives, interest rate derivatives, futures and options, exchange-traded swaps and more. The case ultimately settled for over $185 million.
Implications: Cases with multiple securities will require substantial effort to identify all affected securities and populate data correctly into filings. Each instrument contains unique challenges that may prevent a filing, reduce the distribution, or cause an outright rejection.
2: Scrutinising corporate actions
Cases affected by corporate actions took a major leap — from one instance in 2019, to 12 in 2023. Glencore Opt-in Securities Litigation was a marquee example.
Investors alleged that the company was aware of bribes used to secure business.
That alleged illicit market manipulation led to a US$1.5 billion settlement, and drove Glencore’s stock down around 20 per cent.
Further allegations centred on potentially deceptive statements in prospectuses, including one released in connection with its 2013 all-share merger with Xstrata. Several opt-in litigations are pending.
Implications: Corporate actions can have a substantial impact on the claims filing process. Each may bring unique complexities. Mergers, for example, are complicated by inconsistent transactional records for acquired shares.
Custodians must conduct separate reviews to categorise exchanged shares. Actions outside of the class period can influence filings as well. Every detail needs attention — overlooking one could reduce claim value or make it ineligible.
3: Dealing with complicated instruments
The number of settlements involving complicated instruments (futures, swaps, FX transactions, cryptocurrencies, etc.) is rising. We covered one such case in our 2019 report. In 2023, we examined six.
A notable case from 2023 was the Structured Alpha Mutual Fund Litigation. Structured Alpha touted a complex options trading strategy that could generate risk-managed returns of 10-15 per cent, regardless of market trends.
But instead of the ‘market neutral’ strategy, portfolio managers allegedly enacted a high-risk approach, causing billions in losses during the COVID-19 market crash. The parties reached a US$145 million settlement.
Implications: With complex instruments, it can be challenging to determine what is eligible for a claim. Custodians may have to dedicate hundreds of working hours and create custom procedures to organise and quality-check data to maximise claims.
4: Submitting claims under multiple laws
To maximise recoveries for clients, more custodians are pursuing cases in state and federal courts in tandem. Firms are multiplying their workload to prepare separate, distinct claims for each court system.
That is what unfolded in the Micro Focus International Global Settlement. Investors alleged that Micro Focus misrepresented and omitted facts in the registration statements and prospectus related to its 2017 merger with HPE’s software business segment.
The case had an elaborate procedural history, including a US$107.5 million settlement under both the Securities Act and Exchange Act.
Implications: Navigating proceedings in more than one court adds potential for confusion.
It will be imperative to engage in meticulous monitoring, claim preparation, and data management. Custodians without established multi-court processes may miss out on full claim value.
1: Filing claims for numerous securities
A single case could involve tens of thousands of CUSIPs and ISINs. Take, for example, the Bank Bill Swap Rate (BBSW)-Based Derivatives Antitrust Settlement. The defendants allegedly coordinated manipulative Australian Prime Bank Bill transactions during the daily BBSW Fixing Window to benefit their trading positions.
Any instrument based on the BBSW or using it as a component of price was eligible for a claim. This included FX derivatives, interest rate derivatives, futures and options, exchange-traded swaps and more. The case ultimately settled for over $185 million.
Implications: Cases with multiple securities will require substantial effort to identify all affected securities and populate data correctly into filings. Each instrument contains unique challenges that may prevent a filing, reduce the distribution, or cause an outright rejection.
2: Scrutinising corporate actions
Cases affected by corporate actions took a major leap — from one instance in 2019, to 12 in 2023. Glencore Opt-in Securities Litigation was a marquee example.
Investors alleged that the company was aware of bribes used to secure business.
That alleged illicit market manipulation led to a US$1.5 billion settlement, and drove Glencore’s stock down around 20 per cent.
Further allegations centred on potentially deceptive statements in prospectuses, including one released in connection with its 2013 all-share merger with Xstrata. Several opt-in litigations are pending.
Implications: Corporate actions can have a substantial impact on the claims filing process. Each may bring unique complexities. Mergers, for example, are complicated by inconsistent transactional records for acquired shares.
Custodians must conduct separate reviews to categorise exchanged shares. Actions outside of the class period can influence filings as well. Every detail needs attention — overlooking one could reduce claim value or make it ineligible.
3: Dealing with complicated instruments
The number of settlements involving complicated instruments (futures, swaps, FX transactions, cryptocurrencies, etc.) is rising. We covered one such case in our 2019 report. In 2023, we examined six.
A notable case from 2023 was the Structured Alpha Mutual Fund Litigation. Structured Alpha touted a complex options trading strategy that could generate risk-managed returns of 10-15 per cent, regardless of market trends.
But instead of the ‘market neutral’ strategy, portfolio managers allegedly enacted a high-risk approach, causing billions in losses during the COVID-19 market crash. The parties reached a US$145 million settlement.
Implications: With complex instruments, it can be challenging to determine what is eligible for a claim. Custodians may have to dedicate hundreds of working hours and create custom procedures to organise and quality-check data to maximise claims.
4: Submitting claims under multiple laws
To maximise recoveries for clients, more custodians are pursuing cases in state and federal courts in tandem. Firms are multiplying their workload to prepare separate, distinct claims for each court system.
That is what unfolded in the Micro Focus International Global Settlement. Investors alleged that Micro Focus misrepresented and omitted facts in the registration statements and prospectus related to its 2017 merger with HPE’s software business segment.
The case had an elaborate procedural history, including a US$107.5 million settlement under both the Securities Act and Exchange Act.
Implications: Navigating proceedings in more than one court adds potential for confusion.
It will be imperative to engage in meticulous monitoring, claim preparation, and data management. Custodians without established multi-court processes may miss out on full claim value.
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