|
Tips for
Institutions Regarding Securities Class Actions
Beware of Indirect and Wrongful Solicitation
When the stock of a public company suffers a precipitous drop
and a class action complaint is filed, you may discover that
you are a member of the class. As such, various law firms will
likely telephone or write to solicit you to join in the action
as a "lead plaintiff", as opposed to just being a member
of the class.
You should be aware that, when you receive uninvited solicitations
from various law firms, you will, more than likely, be asked
to fill out a form called a "Certification" which will
be accompanied with an official-looking notice. These notices
and solicitations are often misleading, and many people are led
to believe that they need to fill out the certification to join
the class and obtain a recovery. That is not the case.
Be advised that you have no obligation to become a lead plaintiff
and do not have to fill out any form in the early stages of a
litigation to participate in any recovery in the case as a class
member. Under the applicable law, you are automatically a member
of the class if you bought the securities during the relevant
time period. You may "opt out" of the case when a formal
court ordered notice is issued to you at a later date in the
litigation. You will also receive an official "Proof of
Claim" to file if the action is successfully resolved. Unlike
a "Certification," a "Proof of Claim" should
be filled out by you and filed on a timely basis.
You may, however, consider serving as a lead plaintiff in
a case. We typically advise our clients that, if they are a sophisticated
investor with a major stake in a meritorious case, they can significantly
increase the recovery for themselves and the class in the litigation
by serving as the lead plaintiff. The benefits of being the lead
plaintiff, however, are accompanied with important responsibilities
to the class. Under the federal securities laws, the lead plaintiff
is charged with prosecuting what is usually a large and complex
litigation for the class to a successful resolution either through
settlement or trial. The lead plaintiff is required to select,
retain and supervise the law firm that will serve as lead counsel
to represent you and the class. The choice of that law firm is
one of the most important decisions that you will make as the
lead plaintiff.
Accordingly, you should not select a law firm previously unknown
to you without performing significant due diligence on that law
firm. You should consult your regular outside attorney before
deciding how to proceed. A law firm sending a solicitation to
you promising to handle a case at no cost or expense is not a
sufficient criterion for selecting that counsel to reprsent you.
In such a case, it is the lawyer who has chosen you as lead plaintiff
-- a practice which is unacceptable under the federal securities
laws.
Back to main tips page
|
