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Current Claims Filing Trends in Securities Class Action Settlements

Overall, 2017 was a busy year for securities class action lawsuits. It started at a blistering pace, and finished with the most suits filed since 2001, at a staggering 66% increase over 2016. The resolutions for securities cases, coming in at 353 total, was the highest number since 2001.  This is a 30% increase over 2016.  Furthermore, with 148 of these cases resulting in settlement, 2017 was only two short of the record of 150 that was set in 2007. However, while the number of cases continued to increase, the dollar value of these settlements conversely continued to dip.

One major continuing trend we saw in 2017 was the emergence of actions targeting foreign issuers.  Claims against European companies increased for the second straight year and filings against Chinese firms saw an uptick after the dip in filings occurring in 2016. Going forward, the expectation is that filings against European companies will continue to increase, while filings against Chinese companies will stay steady or slowly decrease.

Another trend was the rise in the number of third-party filers, by both typical institutions, such as brokerage firms, custodian banks, and other institutional investors, and by the historically less typical institutions, such as proprietary third-party claims filers.  The increase in these third party filings has resulted in a huge boost in electronic claims filed.  The days of individuals printing out a claim form, completing the information accurately, and attaching the necessary pages of documentation are long gone.  With the growth of electronic claims came a dramatic decrease of “traditional” paper claim submissions by individual claimants.  We expect to see this trend continue in the years to come.

With the ease of pulling an electronic report and filing electronically, and the increase in third-party proprietary filers bringing more entities under its umbrellas, has resulted in an increase in the number of claims filed. Entities that once relied on providing claim forms to each of its underlying clients holding a security and relying on those individual entities to file claims on their own behalf has now evolved into hiring or contracting with a separate third-party filer to use the entity’s information to file claims. This puts the third-party filer in the position of being responsible for the claim and responsible for curing any deficiencies that may arise, as well as communicating directly with the claims administrator to correct any issues while marketing these extra services as part of package they are offering.

The net result in the growth of electronic claims is that the numbers of claims per case is increasing and the discrepancy in filers between third party and affected claimants has grown wider. It is therefore prudent for attorneys to understand how these trends are playing out so that they can properly communicate with the court how historic trends may not be a proper starting point for evaluating how many claims a modern securities class action may expect to receive. Claims administrators with their finger on the pulse of this trend should also focus on the procedures and processes for intake of the electronic claims received from the third party filers. Due to the growth in third party filings, it is now necessary to have a specific point of contact with third-party filers, otherwise the claims administrator runs the risk of mishandling or misprocessing these very large electronic claims, which may be catastrophic for the settlement. Additionally, these third-party filers are very consistent across cases, so developing a good relationship with them will reap benefits in many settlements in the future.

In closing, 2017 has seen the growth of claims, a boom of third party filers and the growth of claims due to the ease of electronic filing.  We expect these trends to continue into 2018, but we also expect a massive increase in the total value of cases, which was something lacking in the volume of cases filed in 2017.  With the landscape of securities class actions shifting yearly, it is imperative for attorneys and claims administrators to be on the forefront of these trends in order to improve the success of their securities class action settlement. 

Alex Villanova is a project manager for Epiq’s class action, mass tort, and claims administration business unit. As a project manager, Villanova is responsible for overseeing all aspects of case administration, including counsel and court coordination, settlement or judgment implementation, noticing, claims processing, disbursement, budgeting, personnel management, and quality assurance. Since joining Epiq,  Villanova has assisted with the administration of matters for the United States Securities and Exchange Commission and the United States Department of Justice. 

Filed under: claims, class action, settlement