North American securities class actions, particularly within the United States, represent one of the most developed frameworks globally for shareholder redress. Operating on an opt-out basis, this passive participation model automatically includes eligible investors, including those based in Europe, allowing them to obtain compensation without initiating litigation.
Despite the fact that billions of dollars are recovered annually through this mechanism, many European institutional investors hesitate to participate. This reluctance is often based on common misperceptions that exaggerate the risks and complexity of the filing process. For data and operations teams already grappling with resource constraints, these myths can translate into significant operational pain points, meaning that their organisations are often left leaving money on the table.
The Myth of Legal Involvement: It’s Administrative, Not Adversarial
One of the most powerful misperceptions preventing participation is the belief that filing a claim means actively participating in a legal case, potentially damaging commercial relationships with the entity involved.
In fact, by the time investors are asked to file, the legal proceedings have concluded; the lead plaintiff and defendant have already agreed to a settlement, and filing a claim is purely an administrative process, meaning that no legal participation is required.
Furthermore, concern over damaging corporate relationships is misplaced. The claims filing process is confidential. Defendant companies and the public generally do not know the identity of claimants, unless a claimant actively contests an administrator’s determination.
Critically, most settlements are funded by insurance policies, often taken out on behalf of former management. If you do not claim your share of the settlement, it simply increases the share of the settlement proceeds that other claimants receive – in effect the other investors will receive what was your fair share. Investors are simply forfeiting compensation that is rightfully theirs.
The Operational Pain Point: The Resource Drain
The primary operational challenge for European teams is the genuine difficulty of managing hundreds of North American cases with limited internal resources. While the US process is administrative, it is not simple. It is a multi-step process that requires careful tracking of settlements, reconciliation with portfolio holdings, and timely submission. Any omission or error can be very costly, especially since the top 10 US settlements accounted for approximately half of the total recoveries in a year like 2024. The risk of missing one of these major settlements underscores the severity of the resource constraint.
This complexity is often exacerbated by the misconception that a custodian or manager already handles the filing, often free of charge. In fact, custodians often bundle the cost or charge a contingency fee. Institutional investors should request a breakdown of these servicing fees if charges are not explicit.
The Myth of Minimal Payouts and Slow Justice
Another discouraging misperception is that payouts are small and not worth the administrative hassle. In reality, North American recoveries can be substantial. For example, the Twitter, Inc. securities class action settlement distributed $809.5 million to investors, with the largest single claimant receiving over $47 million. Furthermore, one European asset manager client of settlement specialist ISS SCAS received nearly $10 million in a $500 million SEC settlement in 202215. Recoveries over a 12-month period can often return several basis points of AUM for certain client investors.
Finally, the timeline for payment is often faster than anticipated, especially when compared to litigation in other countries. Although the initial litigation may take 3-5 years, investors typically receive payment 1-2 years after the claims filing deadline.
The Solution: Specialisation and Economies of Scale
The solution to mitigating these pain points lies in partnering with specialist claims filing providers. Many institutions rely on US law firms to perform this function, but their core focus is legal advice and securing compensation, not the administrative claims filing itself. Specialist providers, in contrast, offer economies of scale and a dedicated focus. They combine advanced technology with expert analysts to ensure that no claim is missed, and every settlement is captured.
This specialisation ensures that even if investors decide it is better to work with new management or leave accountability to regulators, they do not miss out on settlements that have already been secured. The administrative hurdle, which can require significant time and resources to manage in-house, is more easily overcome by employing providers who track cases and offer robust reporting tools. By outsourcing this complex administrative function, European investors can ensure they receive their due compensation without sacrificing internal resources.
The challenges posed to European investors by North American securities class action claims – as well as possible solutions – are discussed in a white paper from ISS Securities Class Action Services, available for free download here.
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