In the second blog of our series on securities litigation claims, we look at how the complexity of fragmented legal jurisdictions globally often deters European asset managers from getting involved in litigation and argue that the simplicity of the US system may mean participation is easier than many European firms are aware of. Access the full white paper discussing these issues here.
For European investment managers, navigating the world of securities litigation often feels like managing a complex portfolio of disparate risks. While the emerging landscape across Europe, the Middle East, and Africa (EMEA) is characterised by fragmented legal systems, active litigation, and confidential settlements, the experience in North America offers a notable paradox – opportunity. The US process for securities claims is both legally constrained and operationally streamlined, and understanding these unique features can help asset management firms looking to maximise recovery and streamline their operational approach.
Securities litigation in EMEA has grown since 2010, when the US Supreme Court decided in Morrison v. National Australia Bank Ltd. to substantially constrain the litigation of securities fraud cases involving foreign listed shares. As in the US, prominent settlements in EMEA involve securities fraud actions but also what might be called ‘deal’ cases in the US (typically litigated in state courts by shareholders alleging that a merger or corporate reclassification undervalued their shares).
Operationally, however, the US system benefits from unparalleled efficiency when compared to nearly every other global jurisdiction. North America primarily utilises a true class action, ‘opt-out’ system where virtually all investors passively await settlements. This is in sharp contrast to EMEA, where active litigation is the rule and participants often litigate on their own behalf.
The operational simplicity of the US system means investors need only file claims after the fact, following the conclusion of the legal proceedings. Furthermore, the documentation and effort required to participate in US cases is far less onerous than in many EMEA jurisdictions or in Australia.
Unlike the often-confidential settlements found in EMEA, the terms of class action securities settlements in North America, including the recovered amounts, are public. This transparency aids operational teams in validating potential recoveries. Moreover, filings in North America are largely confidential, and the recovery timeline is much faster, with investors typically receiving payment after many fewer years than in active litigation outside the region.
For operational teams managing global recovery efforts, the US system provides clear lessons that should shape their approach:
- Prioritise administrative readiness, not legal resourcing: Given that the US system is well established and changes are largely incremental or more technical, the primary strategic focus for European managers should be on ensuring efficient administrative filing processes. Claims filing in the US is not about active litigation but about timely completion of documentation post-settlement.
- Anticipate and manage parallel cases: Whenever a securities fraud case involves a company with a US listing, there is most likely going to be a parallel case in the US. Firms must resource the capability to track and participate in these inevitable parallel actions, capitalising on the far less onerous documentation requirements of the North American system to secure recoveries.
- Leverage transparency and predictability: The public nature of US settlements provides a predictable framework for budgeting and risk assessment. Asset managers should treat participation in North American claims as a routine, low-risk revenue function, maximizing the return on compensation that is rightfully theirs through passive participation.
By recognizing the foundational differences in the US – namely the passive, streamlined, and low-documentation nature of its claims process – European investment managers can optimise their operations to capture settlements without incurring the significant legal and administrative burden characteristic of active litigation in other regions.
For more information on how your firm could benefit from this approach, please download our free white paper here.
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