Unclaimed billions
26 November 2014
Australian fiduciaries and investors must grasp all opportunities to participate in relevant securities class actions, says Andreas Costi of Goal Group
Image: Shutterstock
Global class actions are moving away from the singular and relatively straightforward focus of a single jurisdiction, the US, to a multiple and complex series of legal systems throughout the world. This international diversification of class actions can be recognised as a combination of restrictions on jurisdiction definitions in US federal courts, along with a growing desire to develop domestic class action procedures in many countries around the globe.
This shift was arguably prompted by the 2010 Morrison v National Australia Bank securities class-action case, in which the US Supreme Court ruled against f-cubed actions. The ruling set a precedent and has changed the global landscape of class action procedures.
Australia has firmly established itself as a hub for securities class-action cases in the Asia-Pacific region, with landmark settlements being reached. It can be argued that these settlements were stimulated by the global financial crisis. Conditions such as a failing securities market, companies finding themselves in unforeseen difficulties, and law firms focusing on securities class actions as a significant business opportunity following legislative reform to personal injury practices, provided a fertile breeding ground for securities class actions to escalate in Australia.
These landmark settlements include the Centro Retail Australia and PricewaterhouseCoopers case, where they agreed to pay AUD 200 million to shareholders. It was found that shareholders were misled by company statements in 2007 that failed to disclose debt levels. This settlement followed the 2008 Aristocrat Leisure Limited class action where the Federal Court of Australia approved a AUD 114.5 million settlement, the largest class action settlement in Australian history at the time. As these show, it is apparent that securities class actions are fast becoming entrenched in Australian litigation.
Such huge settlement figures are proving that participation in class action cases is valuable and worthwhile, particularly as there are now a number of specialist services available that will automate the process of class action participation, which in turn minimises the complexity and cost of recovery. On this basis, there becomes no real viable excuse for non-participation from fund managers and institutional investors.
Although Australia has positioned itself as a frontrunner to process class actions, it is not the only jurisdiction to have adapted to the outcome of the Morrison ruling in the US. Class action legislation is increasingly developing globally and as the procedures move to multiple legislations around the world, Australian fiduciaries are challenged with monitoring international opportunities for investors to participate in actions to recoup their rightful returns.
Greater emphasis is also now being placed on the importance of fiduciary duty and corporate governance reform where disregard or negligence can lead to a significant loss in investment value. Failure to engage in class actions leaves billions in unclaimed settlements, which not only compromises fiduciary integrity but can also present a legal risk with clients’ potentially entitled to legal redress.
With Australian investors now investing $374 billion in foreign equity shares, up from $290 billion at the end of 2010 and $157 billion in 2008 (according to International Monetary Fund figures), it is clear that there is a duty to monitor and participate in securities class action and collective redress opportunities in various countries around the world. Investment in the US in 2013 from Australian investors was $167 billion, $39 billion in the UK and $18 billion in Japan. A research note from Goal Group also revealed that between 2000 and 2012, investors’ non-participation in US securities class actions along has resulted in more than $194 million of Australian investors’ returns being left unclaimed.
It is clear that there are still significant amounts being left unclaimed each year due to non-participation. At this point, it becomes the responsibility of fund managers and custodians to monitor and pursue opportunities to participate in securities litigation.
Furthermore, Goal Group’s analysis of its class actions knowledge base predicts that by 2020, securities class action, group and collective redress settlements outside of the US will reach $8.3 billion annually. The Asia Pacific region is responsible for $3.4 billion of this figure. As a result, Australian fiduciaries and investors must grasp all opportunities to participate in relevant securities class actions, in both their own jurisdiction and elsewhere around the world.
This shift was arguably prompted by the 2010 Morrison v National Australia Bank securities class-action case, in which the US Supreme Court ruled against f-cubed actions. The ruling set a precedent and has changed the global landscape of class action procedures.
Australia has firmly established itself as a hub for securities class-action cases in the Asia-Pacific region, with landmark settlements being reached. It can be argued that these settlements were stimulated by the global financial crisis. Conditions such as a failing securities market, companies finding themselves in unforeseen difficulties, and law firms focusing on securities class actions as a significant business opportunity following legislative reform to personal injury practices, provided a fertile breeding ground for securities class actions to escalate in Australia.
These landmark settlements include the Centro Retail Australia and PricewaterhouseCoopers case, where they agreed to pay AUD 200 million to shareholders. It was found that shareholders were misled by company statements in 2007 that failed to disclose debt levels. This settlement followed the 2008 Aristocrat Leisure Limited class action where the Federal Court of Australia approved a AUD 114.5 million settlement, the largest class action settlement in Australian history at the time. As these show, it is apparent that securities class actions are fast becoming entrenched in Australian litigation.
Such huge settlement figures are proving that participation in class action cases is valuable and worthwhile, particularly as there are now a number of specialist services available that will automate the process of class action participation, which in turn minimises the complexity and cost of recovery. On this basis, there becomes no real viable excuse for non-participation from fund managers and institutional investors.
Although Australia has positioned itself as a frontrunner to process class actions, it is not the only jurisdiction to have adapted to the outcome of the Morrison ruling in the US. Class action legislation is increasingly developing globally and as the procedures move to multiple legislations around the world, Australian fiduciaries are challenged with monitoring international opportunities for investors to participate in actions to recoup their rightful returns.
Greater emphasis is also now being placed on the importance of fiduciary duty and corporate governance reform where disregard or negligence can lead to a significant loss in investment value. Failure to engage in class actions leaves billions in unclaimed settlements, which not only compromises fiduciary integrity but can also present a legal risk with clients’ potentially entitled to legal redress.
With Australian investors now investing $374 billion in foreign equity shares, up from $290 billion at the end of 2010 and $157 billion in 2008 (according to International Monetary Fund figures), it is clear that there is a duty to monitor and participate in securities class action and collective redress opportunities in various countries around the world. Investment in the US in 2013 from Australian investors was $167 billion, $39 billion in the UK and $18 billion in Japan. A research note from Goal Group also revealed that between 2000 and 2012, investors’ non-participation in US securities class actions along has resulted in more than $194 million of Australian investors’ returns being left unclaimed.
It is clear that there are still significant amounts being left unclaimed each year due to non-participation. At this point, it becomes the responsibility of fund managers and custodians to monitor and pursue opportunities to participate in securities litigation.
Furthermore, Goal Group’s analysis of its class actions knowledge base predicts that by 2020, securities class action, group and collective redress settlements outside of the US will reach $8.3 billion annually. The Asia Pacific region is responsible for $3.4 billion of this figure. As a result, Australian fiduciaries and investors must grasp all opportunities to participate in relevant securities class actions, in both their own jurisdiction and elsewhere around the world.
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