There are however times when a class action lawsuit will emerge from other circumstances such as the recently wrecked Italian cruise ship, Costa Concordia which is still the scene of rescue efforts with 20 people still being reported as missing.

So far, it is understood that more than 70 surviving passengers have joined a class action suit against the ship’s owners Costa Crociere. According to some reports, the Italian consumer rights’ association Codacons hopes to get each passenger at least 10,000 Euros in compensation for material damage and for “the fear suffered, the holidays ruined and the serious risks endured”.

Exactly when this class action would come to court is unclear at this stage as the investigation is still in its early stages and the rescue operation is still ongoing. The task of searching for survivors and eventually getting the ship of the rocks, if at all possible will require a herculean effort.

For the captain of the ship, Francesco Schettino, there is mounting blame for the incident which could result in him being sentenced to twelve years in prison on the abandoning ship charge alone. For the ship owners, Carnival, almost a fifth of its value was lost on the Monday following the accident. The share price collapse wiped more than £1bn of their stock market value.

Eine neu veröffentlichte Studie von GOAL Group, einem Expertenhaus für Steuerrückerstattungen zeigt, dass Investoren im Jahr 2010 weltweit 17,39 Milliarden US Dollar (12,24 Mrd. Euro) an rechtmäßigen Rückerstattungen aus internationalen Kapitalanlagen eingebüßt haben, da sie die Quellensteuer auf Dividenden und Erträge nicht ordnungsgemäß zurückgefordert haben. Die Summe der ausstehenden Rückforderungen macht rund ein Viertel des weltweiten Gesamtanteils der möglichen Quellensteuererstattungen aus.

US-Investoren verloren mit 3,16 Milliarden US Dollar (2,22 Mrd. Euro) die höchsten Beträge, gefolgt von britischen Anlegern (1,65 Mrd. US Dollar/1,16 Mrd. Euro) und Investoren aus Japan (1,33 Mrd. US Dollar/936 Mio. Euro). Deutsche Investoren verzichteten auf 982 Millionen US-Dollar (691 Mio. Euro) an Rückerstattungen.

Internationalität spielt lokalen Finanzbehörden in die Hände

Seit der letzten Marktanalyse von GOAL Group im Jahre 2005 sind die ausgebliebenen Rückforderungen der Quellensteuer aufgrund der wachsenden Beliebtheit grenzüberschreitender Kapitalanlagen rapide angestiegen. Laut Statistiken des Internationalen Währungsfonds und der weltweiten Börsen erhöhte sich die Marktkapitalisierung globaler Aktienwerte zwischen 2001 und 2009 um 79 Prozent, während der Wert grenzüberschreitender Wertpapierinvestitionen im gleichen Zeitraum einen Zuwachs von 163 Prozent verzeichnete. Grenzüberschreitender Aktienbesitz hat sich demzufolge im Vergleich zum Marktwachstum mehr als verdoppelt.

Mit der positiven Marktentwicklung hat die Dividendenausschüttung im Jahr 2010 eine Renaissance erfahren. Dieser Trend wird sich vermutlich 2011 aufgrund der wirtschaftlichen Wiederbelebung und der wachsenden Zuversicht der Unternehmen fortsetzen. Parallel dazu ist der Wert der Anleihen auf dem globalen Markt seit Beginn des Jahrzehnts in die Höhe geschnellt.

Angesichts der steigenden Popularität ausländischer Wertpapiere und des anhaltenden Trends der Dividendenausschüttungen wird der Betrag der nicht zurückgeforderten Quellensteuer weiterhin ansteigen, solange sich Anleger nicht aktiv für Ihre Rückerstattungsansprüche einsetzen.

Geschäftsmodell Quellensteuer-Rückforderung

Erträge aus ausländischen Wertpapieren unterliegen der Steuerpflicht im Herkunftsland, aber ein Teil dieser Steuer kann von Depotbanken im Namen ihrer Kunden zurückgefordert werden. Viele führende Vermögensverwalter haben diese Marktlücke bereits entdeckt und bieten Steuerrückerstattungsdienste für Fondsmanager und als Interbanken-Service an. Die Tatsache, dass rund 25 Prozent der möglichen Steuerrückforderung aus internationalen Kapitalanlagen nicht in Anspruch genommen werden, weist deutlich auf ein Optimierungspotenzial hinsichtlich des Umfangs und der Effektivität der Rückerstattungsdienste durch Depotbanken hin.

Mit anziehender Weltkonjunktur bescheinigen Unternehmen ihren Investoren durch erhöhte Dividendenzahlungen, dass sie die Finanzkrise überstanden haben und sich 2011 im Aufschwung befinden. Bewanderte Investoren verfolgen immer häufiger eine internationale Investmentstrategie, um ihre Wertpapiererträge aus Aktien und Anleihen zu maximieren. Ein erheblicher Teil ihrer rechtmäßigen Ansprüche ist in Gefahr, in ausländischen Steuersystemen zu versanden, wenn der Rückerstattung der Quellensteuer nicht die nötige Aufmerksamkeit zugewandt wird“, merkt Stephen Everard, Chief Executive Officer bei Goal Group an.

Alle Martkteilnehmer der Fund-Management-Industrie sollten diese Tatsache ihm zufolge ernst nehmen und sich daran beteiligen, die Erstattungsquoten der Investoren zu erhöhen. „Die Quellensteuerrückerstattung ist eine hochkomplexe Aufgabe, bei der unterschiedliche Daten, Formate und Verfahren der verschiedenen länderspezifischen Gerichtsbarkeiten berücksichtigt werden müssen. Allerdings ist die Technologie, die diesen komplizierten Prozess automatisch durchführt, heutzutage weitgehend verfügbar. Fund Manager und Ihre Depotbanken haben deshalb keine Vorwände, diese technologiebasierten Services nicht im Sinne ihrer Kunden einzusetzen”, so Everard weiter.

Zur Methodik:

Goal Group kombinierte firmeneigene Informationen über Steuerrückforderungszahlen mit einer Vielzahl globaler Quellen über ausländische Portfolioanlagen und Dividendenausschüttungen in verschiedenen Märkten rund um den Globus. Diese Daten wurden zusammen mit aktuellen Informationen über das komplexe Gesamtbild der Quellensteuer-/Rückforderungssätze nach Ländern verwendet, um die Höhe der tatsächlichen nicht zurückgeforderten Summen sowohl auf globaler Ebene als auch für einzelne Länder mit einem größeren Anlagepublikum zu berechnen.

US Investoren verloren mit 3,16 Milliarden US Dollar (2,22 Mrd. Euro) die höchsten Beträge, gefolgt von britischen Anlegern (1,65 Mrd. US Dollar/1,16 Mrd. Euro) und Investoren aus Japan (1,33 Mrd. US Dollar/936 Mio. Euro). Deutsche Investoren verzichteten auf 982 Millionen US Dollar (691 Mio. Euro) an Rückerstattungen.

Internationalität spielt lokalen Finanzbehörden in die Hände

Seit der letzten Marktanalyse von GOAL Group im Jahre 2005 sind die ausgebliebenen Rückforderungen der Quellensteuer aufgrund der wachsenden Beliebtheit grenzüberschreitender Kapitalanlagen rapide angestiegen. Laut Statistiken des Internationalen Währungsfonds und der weltweiten Börsen erhöhte sich die Marktkapitalisierung globaler Aktienwerte zwischen 2001 und 2009 um 79 Prozent, während der Wert grenzüberschreitender Wertpapierinvestitionen im gleichen Zeitraum einen Zuwachs von 163 Prozent verzeichnete. Grenzüberschreitender Aktienbesitz hat sich demzufolge im Vergleich zum Marktwachstum mehr als verdoppelt.

Mit der positiven Marktentwicklung hat die Dividendenausschüttung im Jahr 2010 eine Renaissance erfahren. Dieser Trend wird sich vermutlich 2011 aufgrund der wirtschaftlichen Wiederbelebung und der wachsenden Zuversicht der Unternehmen fortsetzen. Parallel dazu ist der Wert der Anleihen auf dem globalen Markt seit Beginn des Jahrzehnts in die Höhe geschnellt.

Angesichts der steigenden Popularität ausländischer Wertpapiere und des anhaltenden Trends der Dividendenausschüttungen wird der Betrag der nicht zurückgeforderten Quellensteuer weiterhin ansteigen, solange sich Anleger nicht aktiv für Ihre Rückerstattungsansprüche einsetzen.

Geschäftsmodell Quellensteuer-Rückforderung

Erträge aus ausländischen Wertpapieren unterliegen der Steuerpflicht im Herkunftsland, aber ein Teil dieser Steuer kann von Depotbanken im Namen ihrer Kunden zurückgefordert werden. Viele führende Vermögensverwalter haben diese Marktlücke bereits entdeckt und bieten Steuerrückerstattungsdienste für Fondsmanager und als Interbanken-Service an. Die Tatsache, dass rund 25 Prozent der möglichen Steuerrückforderung aus internationalen Kapitalanlagen nicht in Anspruch genommen werden, weist deutlich auf ein Optimierungspotenzial hinsichtlich des Umfangs und der Effektivität der Rückerstattungsdienste durch Depotbanken hin.

Stephen Everard (Bild links), Chief Executive Officer bei Goal Group, kommentiert: „Mit anziehender Weltkonjunktur bescheinigen Unternehmen Ihren Investoren durch erhöhte Dividendenzahlungen, dass sie die Finanzkrise überstanden haben und sich 2011 im Aufschwung befinden. Bewanderte Investoren verfolgen immer häufiger eine internationale Investmentstrategie, um ihre Wertpapiererträge aus Aktien und Anleihen zu maximieren. Ein erheblicher Teil ihrer rechtmäßigen Ansprüche ist in Gefahr, in ausländischen Steuersystemen zu versanden, wenn der Rückerstattung der Quellensteuer nicht die nötige Aufmerksamkeit zugewandt wird. Alle Martkteilnehmer der Fund-Management-Industrie sollten diese Tatsache ernst nehmen und sich daran beteiligen, die Erstattungsquoten der Investoren zu erhöhen. Die Quellensteuerrückerstattung ist eine hochkomplexe Aufgabe, bei der unterschiedliche Daten, Formate und Verfahren der verschiedenen länderspezifischen Gerichtsbarkeiten berücksichtigt werden müssen. Allerdings ist die Technologie, die diesen komplizierten Prozess automatisch durchführt, heutzutage weitgehend verfügbar. Fund Manager und Ihre Depotbanken haben deshalb keine Vorwände, diese technologiebasierten Services nicht im Sinne ihrer Kunden einzusetzen.”

Zur Methodik:

Goal Group kombinierte firmeneigene Informationen über Steuerrückforderungszahlen mit einer Vielzahl globaler Quellen über ausländische Portfolioanlagen und Dividendenausschüttungen in verschiedenen Märkten rund um den Globus. Diese Daten wurden zusammen mit aktuellen Informationen über das komplexe Gesamtbild der Quellensteuer-/Rückforderungssätze nach Ländern verwendet, um die Höhe der tatsächlichen nicht zurückgeforderten Summen sowohl auf globaler Ebene als auch für einzelne Länder mit einem größeren Anlagepublikum zu berechnen. (aa)

Eine neue Studie von GOAL Group, dem führenden Experten für Steuerrückerstattungen, verdeutlicht, dass Investoren im Jahr 2010 weltweit 12,24 Milliarden Euro an rechtmäßigen Rückerstattungen aus internationalen Kapitalanlagen eingebüßt haben, da die Quellensteuer auf Dividenden und Erträge nicht ordnungsgemäß zurückgefordert wurde. Die Summe der ausstehenden Rückforderungen macht rund ein Viertel des weltweiten Gesamtanteils der möglichen Quellensteuererstattungen aus.

US Investoren verloren dabei mit 3,16 Milliarden Dollar (rd. 2,22 Mrd. Euro) die höchsten Beträge, gefolgt von britischen Anlegern mit 1,16 Milliarden Euro und Investoren aus Japan mit 936 Millionen Euro. Deutsche Investoren verzichteten unfreiwillig auf 982 691 Millionen Euro an Rückerstattungen.

Seit der letzten Marktanalyse von GOAL Group im Jahre 2005 sind die ausgebliebenen Rückforderungen der Quellensteuer aufgrund der wachsenden Beliebtheit grenzüberschreitender Kapitalanlagen rapide angestiegen. Laut Statistiken des Internationalen Währungsfonds und der weltweiten Börsen erhöhte sich die Marktkapitalisierung globaler Aktienwerte zwischen 2001 und 2009 um 79 Prozent, während der Wert grenzüberschreitender Wertpapierinvestitionen im gleichen Zeitraum einen Zuwachs von 163 Prozent verzeichnete. Grenzüberschreitender Aktienbesitz hat sich demzufolge im Vergleich zum Marktwachstum mehr als verdoppelt.

Mit der positiven Marktentwicklung hat die Dividendenausschüttung im Jahr 2010 eine Renaissance erfahren. Dieser Trend wird sich vermutlich 2011 aufgrund der wirtschaftlichen Wiederbelebung und der wachsenden Zuversicht der Unternehmen fortsetzen. Parallel dazu ist der Wert der Anleihen auf dem globalen Markt seit Beginn des Jahrzehnts in die Höhe geschnellt. Angesichts der steigenden Popularität ausländischer Wertpapiere und des anhaltenden Trends der Dividendenausschüttungen wird der Betrag der nicht zurückgeforderten Quellensteuer weiterhin ansteigen, solange sich Anleger nicht aktiv für Ihre Rückerstattungsansprüche einsetzen.

Erträge aus ausländischen Wertpapieren unterliegen der Steuerpflicht im Herkunftsland, aber ein Teil dieser Steuer kann von Depotbanken im Namen ihrer Kunden zurückgefordert werden. Viele führende Vermögensverwalter haben diese Marktlücke bereits entdeckt und bieten Steuerrückerstattungsdienste für Fondsmanager und als Interbanken-Service an. Die Tatsache, dass rund 25 Prozent der möglichen Steuerrückforderung aus internationalen Kapitalanlagen nicht in Anspruch genommen werden, weist deutlich auf ein Optimierungspotenzial hinsichtlich des Umfangs und der Effektivität der Rückerstattungsdienste durch Depotbanken hin, heißt es in der Studie.

Stephen Everard, Chief Executive Officer bei Goal Group, kommentiert: „Mit anziehender Weltkonjunktur bescheinigen Unternehmen Ihren Investoren durch erhöhte Dividendenzahlungen, dass sie die Finanzkrise überstanden haben und sich 2011 im Aufschwung befinden. Bewanderte Investoren verfolgen immer häufiger eine internationale Investmentstrategie, um ihre Wertpapiererträge aus Aktien und Anleihen zu maximieren. Ein erheblicher Teil ihrer rechtmäßigen Ansprüche ist in Gefahr, in ausländischen Steuersystemen zu versanden, wenn der Rückerstattung der Quellensteuer nicht die nötige Aufmerksamkeit zugewandt wird. Alle Marktteilnehmer der Fund-Management-Industrie sollten diese Tatsache ernst nehmen und sich daran beteiligen, die Erstattungsquoten der Investoren zu erhöhen. Die Quellensteuerrückerstattung ist eine hochkomplexe Aufgabe, bei der unterschiedliche Daten, Formate und Verfahren der verschiedenen länderspezifischen Gerichtsbarkeiten berücksichtigt werden müssen. Allerdings ist die Technologie, die diesen komplizierten Prozess automatisch durchführt, heutzutage weitgehend verfügbar. Fund Manager und Ihre Depotbanken haben deshalb keine Vorwände, diese technologiebasierten Services nicht im Sinne ihrer Kunden einzusetzen.“

Investoren fordern nur selten die Quellensteuer auf internationale Kapitalerträge zurück, Nutznießer sind die Steuerbehörden

Investoren fordern nur selten die Quellensteuer auf internationale Kapitalerträge zurück, Nutznießer sind die Steuerbehörden

Investoren schenken ihren Staaten eine Menge Geld: Im vergangenen Jahr verloren sie weltweit rund 17,4 Milliarden US-Dollar, weil sie in ihren Steuererklärungen die bereits bezahlte Quellensteuer auf Dividenden und Kapitalerträge im Ausland nicht zurückgefordert haben. Das zeigt eine Studie der Londoner Beratung Goal Group, die sich auch auf internationale Steuerfragen spezialisiert hat.”Erfahrene Investoren verfolgen zunehmend eine internationale Investmentstrategie, um ihre Wertpapiererträge aus Aktien und Anleihen zu maximieren”, sagt Stephen Everard, Vorstandschef der Goal Group. “Ein erheblicher Teil ihrer rechtmäßigen Ansprüche ist in Gefahr, in ausländischen Steuersystemen zu versanden, wenn der Rückerstattung der Quellensteuer nicht die nötige Aufmerksamkeit zugewandt wird.“

Everard empfiehlt Vermögensverwaltern und auch Finanzberatern, dem Thema mehr Aufmerksamkeit zu schenken und Kunden auch in Sachen Quellensteuer und Rückerstattung bei internationalen Anlagen zu widmen. Denn laut Studie, für die die Goal Group Steuer- und Finanzdaten aus verschiedenen Quellen auswertete, verloren US-Investoren allein im vergangenen Jahr 3,16 Milliarden Dollar, weil sie die Steuer nicht zurückforderten. Britische Anleger ließen 1,65 Milliarden Dollar sausen, japanische indes 1,33 Milliarden Dollar. Deutsche Sparer schenken dem Fiskus immerhin noch 983 Millionen Dollar im Jahr.

Hintergrund für das wachsende Problem mit nicht zurückgeforderter Quellensteuer ist die Internationalisierung der Kapitalanlagen: Laut Internationalem Währungsfonds stieg die Marktkapitalisierung börsennotierter Unternehmen weltweit zwischen 2001 und 2009 um 79 Prozent, gleichzeitig stieg der Wert grenzüberschreitender Wertpapier-Investitionen um 163 Prozent. Allerdings: Gewinne, die mit ausländischen Wertpapieren gemacht werden, müssen im Herkunftsland des Unternehmens oder des Anbieters versteuert werden. Ein Teil dieser Steuern kann aber von den Depotbanken im Namen ihrer Kunden zurückgefordert werden. Doch dies unterbleibt in vielen Fällen. Schon haben Spezialisten diesen markt als lukratives Beratungsfeld entdeckt und bieten Fondsgesellschaften, Banken oder auch Investoren an, sich gegen Provisionen um die Rückerstattung der Quellensteuer sowie auf die Optimierung von Steuerfragen im Depot zu kümmern.

Die Steuerbehörden können sich die Hände reiben: Das Problem wird weiter wachsen. Denn mit der Erholung der Börsenmärkte nach der Finanzkrise im vergangenen Jahr schütten Unternehmen wieder vermehrt Dividenden aus. „Mit anziehender Weltkonjunktur bescheinigen Unternehmen ihren Investoren dadurch, dass sie die Finanzkrise überstanden haben und sich 2011 im Aufschwung befinden”, erläutert Goal-Chef Everard. Folglich nehmen die Renditen in den Depots zu, auf die Quellensteuer verlangt wird. Außerdem wächst zurzeit das Volumen international verkaufter und gekaufter Anleihen weiter an.

Die Steuerbehörden können jedoch sicher sein, dass ein großer Teil der zu viel gezahlten Quellensteuern nicht zurückgefordert wird. Im vergangenen Jahr wurden ein Viertel der Zahlungen nicht zurückerstattet qerden. „Die Quellensteuerrückerstattung ist eine hochkomplexe Aufgabe, bei der unterschiedliche Daten, Formate und Verfahren der verschiedenen länderspezifischen Gerichtsbarkeiten berücksichtigt werden müssen”, erklärt Everard, “Allerdings ist die Technologie, die diesen komplizierten Prozess automatisch durchführt, heutzutage weitgehend verfügbar. Fondsmanager und Depotbanken haben deshalb keine Ausreden mehr, diese technologiebasierten Services nicht im Sinne ihrer Kunden einzusetzen.” Die Frage ist also, wie Kunden und ihre Vertreter, die Berater, mit den Fondsgesellschaften und Banken in Steuerfragen verhandeln.

Allein deutsche Investoren haben im vergangenen Jahr fast 700 Millionen Euro verloren, weil sie es versäumten, sich Quellensteuern für internationale Kapitalanlagen zurückerstatten zu lassen. International lassen sich Anleger zweistellige Milliardenbeträge durch die Lappen gehen. Das zeigt eine Studie des Datenanalysten Goal Group.

Die auf Steuerrückerstattungen spezialisierten Experten haben ausgerechnet, dass Investoren im Jahr 2010 weltweit 17,39 Milliarden US-Dollar (12,24 Milliarden Euro) an rechtmäßigen Rückerstattungen aus internationalen Kapitalanlagen eingebüßt haben, da die Quellensteuer auf Dividenden und Erträge nicht ordnungsgemäß zurückgefordert wurde.

Die Summe der ausstehenden Rückforderungen macht laut Goal Group rund ein Viertel des weltweiten Gesamtanteils der möglichen Quellensteuererstattungen aus.

US-Investoren lassen sich die höchsten Beträge entgehen

Der Studie zufolge verloren US-Investoren mit umgerechnet 2,22 Milliarden Euro die höchsten Beträge, gefolgt von britischen Anlegern (1,16 Milliarden Euro) und Investoren aus Japan (936 Millionen Euro). Deutsche Investoren verzichteten demnach auf 691 Millionen Euro an Rückerstattungen.

Seit der letzten Marktanalyse im Jahr 2005 seien die ausgebliebenen Rückforderungen der Quellensteuer aufgrund der wachsenden Beliebtheit grenzüberschreitender Kapitalanlagen rapide angestiegen, konstatieren die Goal-Analysten.

Laut Statistiken des Internationalen Währungsfonds und der weltweiten Börsen habe sich die Marktkapitalisierung globaler Aktienwerte zwischen 2001 und 2009 um 79 Prozent erhöht, während der Wert grenzüberschreitender Wertpapierinvestitionen im gleichen Zeitraum einen Zuwachs von 163 Prozent verzeichnete. Grenzüberschreitender Aktienbesitz habe sich demzufolge im Vergleich zum Marktwachstum mehr als verdoppelt.

“Mit der positiven Marktentwicklung hat die Dividendenausschüttung im Jahr 2010 eine Renaissance erfahren. Dieser Trend wird sich vermutlich 2011 aufgrund der wirtschaftlichen Wiederbelebung und der wachsenden Zuversicht der Unternehmen fortsetzen”, schreiben die Experten der Goal Group.

Parallel dazu sei der Wert der Anleihen auf dem globalen Markt seit Beginn des Jahrzehnts in die Höhe geschnellt. Angesichts der steigenden Popularität ausländischer Wertpapiere und des anhaltenden Trends der Dividendenausschüttungen werde der Betrag der nicht zurückgeforderten Quellensteuer weiterhin ansteigen, solange sich Anleger nicht aktiv für ihre Rückerstattungsansprüche einsetzen.

Steuerrückerstattung als Marktlücke für Vermögensverwalter

Hintergrund: Erträge aus ausländischen Wertpapieren unterliegen der Steuerpflicht im Herkunftsland, aber ein Teil dieser Steuer kann von Depotbanken im Namen ihrer Kunden zurückgefordert werden.

Laut Goal Group haben viele führende Vermögensverwalter diese Marktlücke bereits entdeckt und bieten Steuerrückerstattungsdienste für Fondsmanager und als Interbanken-Service an. Die Tatsache, dass rund 25 Prozent der möglichen Steuerrückforderung aus internationalen Kapitalanlagen nicht in Anspruch genommen würden, weise deutlich auf ein Optimierungspotenzial hinsichtlich des Umfangs und der Effektivität der Rückerstattungsdienste durch Depotbanken hin.

“Mit anziehender Weltkonjunktur bescheinigen Unternehmen ihren Investoren durch erhöhte Dividendenzahlungen, dass sie die Finanzkrise überstanden haben und sich 2011 im Aufschwung befinden. Bewanderte Investoren verfolgen immer häufiger eine internationale Investmentstrategie, um ihre Wertpapiererträge aus Aktien und Anleihen zu maximieren” erklärt Goal-Group-CEO Stephen Everard.

Ein erheblicher Teil ihrer rechtmäßigen Ansprüche sei in Gefahr, in ausländischen Steuersystemen zu versanden, wenn der Rückerstattung der Quellensteuer nicht die nötige Aufmerksamkeit zugewandt werde, so Everard weiter.

Technische Möglichkeiten sollen Erstattungsquoten erhöhen

Der Goal-Group-Chef fordert alle Martkteilnehmer der Fund-Management-Industrie auf, diese Tatsache ernst nehmen und sich daran zu beteiligen, die Erstattungsquoten der Investoren zu erhöhen. Die Quellensteuerrückerstattung sei zwar eine hochkomplexe Aufgabe, bei der unterschiedliche Daten, Formate und Verfahren der verschiedenen länderspezifischen Gerichtsbarkeiten berücksichtigt werden müssen.

Allerdings sei die Technologie, die diesen komplizierten Prozess automatisch durchführe, heutzutage weitgehend verfügbar. “Fund Manager und ihre Depotbanken haben deshalb keine Vorwände, diese technologiebasierten Services nicht im Sinne ihrer Kunden einzusetzen”, sagt Everard. (hb)

Anleger verschenken jedes Jahr Milliarden an den Staat, weil sie sich bei Investitionen im Ausland die doppelt bezahlte Quellensteuer nicht zurückholen. Der Grund: Es ist einfach zu kompliziert.

DüsseldorfBei der Rendite schauen Anleger oft auf jeden Cent – da ist es verwunderlich, dass sie vergangenes Jahr 12,24 Milliarden Euro verschwendet haben. So viel, besagt eine neue Studie des Finanzdienstleisters Goal Group, hätten Anleger sich an Quellensteuer rückerstatten lassen können – haben es aber versäumt. Das ist ein Viertel der kompletten Summe, die die Finanzämter an Quellensteuer insgesamt schuldig waren.

Warum sind die Anleger so nachlässig? Wird auch nur ein halbes Prozent mehr Zinsen versprochen, schichten sie schon mal um, und Dividenden fordern Investoren immer aggressiver ein. Doch bei der Quellensteuer lassen sie sich bereits verdiente Rendite entgehen.

Die Quellensteuer wird, wie der Name schon besagt, an der Quelle der Einkünfte abgezogen und an das Finanzamt überwiesen. Eine Art der Quellensteuer ist die Lohnsteuer, die direkt beim Arbeitgeber abgezogen wird. Außerdem zählt auch die Kapitalertragssteuer dazu, und diese ist für Investoren in ausländischen Anlagen besonders relevant. Auch die Abgeltungssteuer, die in Deutschland 25 Prozent beträgt, gehört zu den Quellensteuern. Kursgewinne, Zinsen und Dividenden werden dadurch oft doppelt besteuert. Doch wenn ein Doppelbesteuerungsabkommen besteht, können Anleger einiges wieder zurückfordern.

Die Frage ist nur, wie das funktioniert. Manche Kunden müssen sich um nichts kümmern, denn die Depotbank erledigt die Rückerstattung. Allerdings bieten nicht alle Depotbanken diesen Service an, und selbst dort ist er meist Großkunden vorbehalten, die hohe Summen investieren und dadurch auch einiges an Gebühren zahlen – erst dann lohnt es sich für die Depotbank.

Für Privatpersonen und ganz ohne Hilfe der Depotbank sei es fast nicht machbar, diese Steuern selbst zurückzufordern, sagt Stephen Everard, Chef der Goal Group: „Die normale Steuererklärung ist schwer genug. Bei grenzüberschreitenden Anlagen haben Investoren es sogar mit mehreren Steuerbehörden zu tun, mit einer fremden Gesetzgebung in einer fremden Sprache.“ Wer die Rückforderung selbst in die Hand nehmen will, muss sich auf das Abenteuer einer langen Recherche einlassen: Auf der Internetseite der Vereinten Nationen sind die Abkommen zwischen verschiedenen Ländern zu finden, allerdings meist in fremder Sprache.

Die Münchner DAB Bank zum Beispiel bietet selbst einen Service an, der die Rückerstattung regelt – allerdings auf einige Länder beschränkt. Andere Banken und Fonds nutzen den Dienst einer unabhängigen Firma, die sich genau darauf spezialisiert hat. Davon gibt es laut Angaben der Goal Group weltweit nur drei bis vier. Allerdings könnte es in diesem Bereich noch genug Kundschaft für mehr geben.

Nicht nur Privatanleger sondern auch institutionelle Investoren vernachlässigen das Thema. Gerade für Hedge-Fonds war das Eintreiben der Quellensteuerrückerstattung in der Vergangenheit kaum ein Thema. Traditionell seien diese Fonds in Steueroasen wie den Cayman Islands ansässig gewesen, wo Anleger kaum Steuern bezahlen und so auch bei der Rückerstattung wenig zu holen ist, sagt Everard. In letzter Zeit ändere sich die geographische Verteilung der Hedge-Fonds. „Investment- und Hedge-Fonds fordern nur selten diese Steuern wieder ein, und auch Pensionsfonds könnten da noch viel herausholen“, sagt Everard. Für die Performance der Fonds wäre das ein wertvoller Gewinn.

 It sounds too good to be true. However there is always risk in financial ventures, as there must be.  In the blink of an eye, the market you invested in could ‘crash’ or the business itself can go bankrupt.

When an unfortunate event like this occurs, you need professional help to reclaim your assets that are tied up in the business. As it is a very complicated and length process legal assistance is, most of the time, needed.

It is not your fault that the company failed so why should you pay for someone else’s mistake with your hard earned money? Yes, it is true that there are risks involved with investing, you can still have some security for when times like this occurs.

With this in mind, who can you turn to? There are many companies that offer services in class action settlement services. An example of such a company is Goal Group which is widely acknowledged in the class action lawsuit market and financial services sector for its innovative and creative solutions particularly in getting investors money back due to miss-management of the company. 

What makes Goal Group stand out is that they offer an extremely niche service and have developed bespoke documentation management software and tax software. The company’s solutions include: 

• Goal Global Recoveries Limited (GGRL)
• Global Tax Reclamation Solution (GTRS)
• Goal TaxBack
• Global Qualified Intermediary (GQI)
• Tax Guru
• Goal Documentation Management System (GDMS)
• Customised Software

In addition to this, Goal Group also partners with many well known companies such as, Interactive Data Corporation,  MintTwist Ltd, Today Translations and many more. They are also advised by companies such as, Lambert Chapman LLP, Barclays Corporate Banking and Pritchard Englefield.

Their clients are globally based and include hedge funds, local government agencies, private banks, high net worth individuals, investment banks and prime brokers, who ass use Goal Group’s services to be more efficient, cautious and profitable.

Indeed, Goal Group can help soften the blow in the time of a financial crisis.

Rupert Murdoch

New York – A US shareholder who purchased $38,000 in News Corp shares earlier this year filed a class action lawsuit against the global media group on Friday, claiming that News Corp, the Murdochs, and Rebekah Brooks intentionally covered up and concealed the phone hacking offenses.

The investor, Lewis Wilder, has initiated the first federal-level lawsuit against the News Corp US division in regard to their British newspaper’s damage on the company’s share price because of the illegal activities that have been revealed in recent weeks.

Mr Wilder, who bought 1,000 News Corp shares in late April and 1,000 more in early June through an associated trust, has accused Rupert and James Murdoch of having “affirmatively sanctioned or, at the very least, turned a blind eye to the rampant illegality taking place at News Corp’s newspapers.”  Mr Wilder sold his 2,000 shares on July 12, causing him to lose $5,271.

The case, filed in New York, alleges that News Corp and its executives participated in fraudulent, deceptive and misleading behavior and breached the US Securities Exchange Act by issuing “materially false and misleading” statements to investors from March 3 to July 11.  This lawsuit has the potential to cover thousands of shareholders who traded millions of shares in that period.

James Murdoch

Mr Wilder asserts that News Corp and its senior executives “either had actual knowledge of the misrepresentations and omissions of material facts [about the hacking] … or acted with reckless disregard for the truth in that they failed to ascertain and disclose the truth about News Corp’s illegal activities, even though the truth was available to them”.

The New York Southern District Court must certify the US case before it can proceed as a class action.

When companies are paying dividends to overseas investors, many countries will apply a withholding tax to the dividends before it reaches the investors.  It is then up to the investor to reclaim anything they are owed.

For UK investors, there are double taxation treaties with different countries, at least a 100.  Investors are able to reclaim the difference between what is normally taxed in the foreign country and the lower rate listed in the specified treaty.

However, according to studies, only 7% of all possible withholding tax on dividends is being reclaimed globally.  It is estimated that investors lose about 13% of their total possible returns.

For UK investors investing in US shares, about 30% of is withheld from their dividends.  UK residents are able to reclaim about 15% of that back, meaning for £1000 dividends, £150 can be reclaimed from the £300 deducted.

Many investors choose not to reclaim this money because their investments are not significant enough to make the refund process worth doing, or would like to avoid the hassle.  For those who do find reclaiming that money a worth-while endeavor, organizations like Goal Group can help to ensure that their clients are receiving all the money they can.

Washington Mutual Inc., a savings bank holding company that was created in 1898, had collapsed in 2008.  The company’s fall has been attributed to a focus on lower-income borrowers and “reckless lending” by the bank’s head, Kerry Killinger. As one of the premier banks in mortgage loans, WaMu also suffered greatly in the housing market downturn in 2007.

Eventually, federal regulators seized WaMu’s main bank based in Seattle, and sold its assets to JP Morgan Chase & Co. for $1.8 billion.  It is considered to be the largest bank failure in US history.

In March 2011, the F.D.I.C. sued Killinger and two top lieutenants for reckless lending prior to the bank’s collapse in 2008.The plaintiffs include large pension funds and individual investigators, accusing WaMu of securities fraud.

According to an article by Alex Veiga of the Associated Press, the lead plaintiff in this case, Ontario Teachers’ Pension Plan Board, helped to outline the details of the agreement with the US district court in Seattle.  In this agreement, Washington Mutual is to pay $105 million, Goldman, Sachs & Co. to pay $85 million, and Deloitte & Touche LLP to pay $18.5 million.  In exchange, the plaintiffs will dismiss all complaints against the bank and its co-defendants.

Also included in this deal is that WMI and its co-defendants do not admit to any wrongdoing.

In cases of class action lawsuits, companies or investors often hire external services to help in ensuring that shareholders receive the money they deserve and that the company is operating as it should.  Companies like Goal Group provide class action services in companies where there has been proven mis-management and/or unlawful behaviour.

US Investoren verloren mit 3,16 Milliarden US Dollar (2,22 Mrd. Euro) die höchsten Beträge, gefolgt von britischen Anlegern (1,65 Mrd. US Dollar/1,16 Mrd. Euro) und Investoren aus Japan (1,33 Mrd. US Dollar/936 Mio. Euro). Deutsche Investoren verzichteten auf 982 Millionen US Dollar (691 Mio. Euro) an Rückerstattungen.

Internationalität spielt lokalen Finanzbehörden in die Hände

Seit der letzten Marktanalyse von GOAL Group im Jahre 2005 sind die ausgebliebenen Rückforderungen der Quellensteuer aufgrund der wachsenden Beliebtheit grenzüberschreitender Kapitalanlagen rapide angestiegen. Laut Statistiken des Internationalen Währungsfonds und der weltweiten Börsen erhöhte sich die Marktkapitalisierung globaler Aktienwerte zwischen 2001 und 2009 um 79 Prozent, während der Wert grenzüberschreitender Wertpapierinvestitionen im gleichen Zeitraum einen Zuwachs von 163 Prozent verzeichnete. Grenzüberschreitender Aktienbesitz hat sich demzufolge im Vergleich zum Marktwachstum mehr als verdoppelt.

Mit der positiven Marktentwicklung hat die Dividendenausschüttung im Jahr 2010 eine Renaissance erfahren. Dieser Trend wird sich vermutlich 2011 aufgrund der wirtschaftlichen Wiederbelebung und der wachsenden Zuversicht der Unternehmen fortsetzen. Parallel dazu ist der Wert der Anleihen auf dem globalen Markt seit Beginn des Jahrzehnts in die Höhe geschnellt.

Angesichts der steigenden Popularität ausländischer Wertpapiere und des anhaltenden Trends der Dividendenausschüttungen wird der Betrag der nicht zurückgeforderten Quellensteuer weiterhin ansteigen, solange sich Anleger nicht aktiv für Ihre Rückerstattungsansprüche einsetzen.

Geschäftsmodell Quellensteuer-Rückforderung

Erträge aus ausländischen Wertpapieren unterliegen der Steuerpflicht im Herkunftsland, aber ein Teil dieser Steuer kann von Depotbanken im Namen ihrer Kunden zurückgefordert werden. Viele führende Vermögensverwalter haben diese Marktlücke bereits entdeckt und bieten Steuerrückerstattungsdienste für Fondsmanager und als Interbanken-Service an. Die Tatsache, dass rund 25 Prozent der möglichen Steuerrückforderung aus internationalen Kapitalanlagen nicht in Anspruch genommen werden, weist deutlich auf ein Optimierungspotenzial hinsichtlich des Umfangs und der Effektivität der Rückerstattungsdienste durch Depotbanken hin.

Stephen Everard (Bild links), Chief Executive Officer bei Goal Group, kommentiert: „Mit anziehender Weltkonjunktur bescheinigen Unternehmen Ihren Investoren durch erhöhte Dividendenzahlungen, dass sie die Finanzkrise überstanden haben und sich 2011 im Aufschwung befinden. Bewanderte Investoren verfolgen immer häufiger eine internationale Investmentstrategie, um ihre Wertpapiererträge aus Aktien und Anleihen zu maximieren. Ein erheblicher Teil ihrer rechtmäßigen Ansprüche ist in Gefahr, in ausländischen Steuersystemen zu versanden, wenn der Rückerstattung der Quellensteuer nicht die nötige Aufmerksamkeit zugewandt wird. Alle Martkteilnehmer der Fund-Management-Industrie sollten diese Tatsache ernst nehmen und sich daran beteiligen, die Erstattungsquoten der Investoren zu erhöhen. Die Quellensteuerrückerstattung ist eine hochkomplexe Aufgabe, bei der unterschiedliche Daten, Formate und Verfahren der verschiedenen länderspezifischen Gerichtsbarkeiten berücksichtigt werden müssen. Allerdings ist die Technologie, die diesen komplizierten Prozess automatisch durchführt, heutzutage weitgehend verfügbar. Fund Manager und Ihre Depotbanken haben deshalb keine Vorwände, diese technologiebasierten Services nicht im Sinne ihrer Kunden einzusetzen.”

Zur Methodik:

Goal Group kombinierte firmeneigene Informationen über Steuerrückforderungszahlen mit einer Vielzahl globaler Quellen über ausländische Portfolioanlagen und Dividendenausschüttungen in verschiedenen Märkten rund um den Globus. Diese Daten wurden zusammen mit aktuellen Informationen über das komplexe Gesamtbild der Quellensteuer-/Rückforderungssätze nach Ländern verwendet, um die Höhe der tatsächlichen nicht zurückgeforderten Summen sowohl auf globaler Ebene als auch für einzelne Länder mit einem größeren Anlagepublikum zu berechnen. (aa)

http://www.institutional-money.com/cms/news/uebersicht/artikel/milliardengeschenk-an-den-fiskus-nicht-zurueckgeforderte-quellensteuern-kommen-teuer/?tx_ttnews[backPid]=11&cHash=341f064b3c

Düsseldorf – Bei der Rendite schauen Anleger oft auf jeden Cent – da ist es verwunderlich, dass sie vergangenes Jahr 12,24 Milliarden Euro verschwendet haben. So viel, besagt eine neue Studie des Finanzdienstleisters Goal Group, hätten Anleger sich an Quellensteuer rückerstatten lassen können – haben es aber versäumt. Das ist ein Viertel der kompletten Summe, die die Finanzämter an Quellensteuer insgesamt schuldig waren.

Warum sind die Anleger so nachlässig? Wird auch nur ein halbes Prozent mehr Zinsen versprochen, schichten sie schon mal um, und Dividenden fordern Investoren immer aggressiver ein. Doch bei der Quellensteuer lassen sie sich bereits verdiente Rendite entgehen.

Die Quellensteuer wird, wie der Name schon besagt, an der Quelle der Einkünfte abgezogen und an das Finanzamt überwiesen. Eine Art der Quellensteuer ist die Lohnsteuer, die direkt beim Arbeitgeber abgezogen wird. Außerdem zählt auch die Kapitalertragssteuer dazu, und diese ist für Investoren in ausländischen Anlagen besonders relevant. Auch die Abgeltungssteuer, die in Deutschland 25 Prozent beträgt, gehört zu den Quellensteuern. Kursgewinne, Zinsen und Dividenden werden dadurch oft doppelt besteuert. Doch wenn ein Doppelbesteuerungsabkommen besteht, können Anleger einiges wieder zurückfordern.

Die Frage ist nur, wie das funktioniert. Manche Kunden müssen sich um nichts kümmern, denn die Depotbank erledigt die Rückerstattung. Allerdings bieten nicht alle Depotbanken diesen Service an, und selbst dort ist er meist Großkunden vorbehalten, die hohe Summen investieren und dadurch auch einiges an Gebühren zahlen – erst dann lohnt es sich für die Depotbank.

Für Privatpersonen und ganz ohne Hilfe der Depotbank sei es fast nicht machbar, diese Steuern selbst zurückzufordern, sagt Stephen Everard, Chef der Goal Group: „Die normale Steuererklärung ist schwer genug. Bei grenzüberschreitenden Anlagen haben Investoren es sogar mit mehreren Steuerbehörden zu tun, mit einer fremden Gesetzgebung in einer fremden Sprache.“ Wer die Rückforderung selbst in die Hand nehmen will, muss sich auf das Abenteuer einer langen Recherche einlassen: Auf der Internetseite der Vereinten Nationen sind die Abkommen zwischen verschiedenen Ländern zu finden, allerdings meist in fremder Sprache.

Die Münchner DAB Bank zum Beispiel bietet selbst einen Service an, der die Rückerstattung regelt – allerdings auf einige Länder beschränkt. Andere Banken und Fonds nutzen den Dienst einer unabhängigen Firma, die sich genau darauf spezialisiert hat. Davon gibt es laut Angaben der Goal Group weltweit nur drei bis vier. Allerdings könnte es in diesem Bereich noch genug Kundschaft für mehr geben.

Nicht nur Privatanleger sondern auch institutionelle Investoren vernachlässigen das Thema. Gerade für Hedge-Fonds war das Eintreiben der Quellensteuerrückerstattung in der Vergangenheit kaum ein Thema. Traditionell seien diese Fonds in Steueroasen wie den Cayman Islands ansässig gewesen, wo Anleger kaum Steuern bezahlen und so auch bei der Rückerstattung wenig zu holen ist, sagt Everard. In letzter Zeit ändere sich die geographische Verteilung der Hedge-Fonds. „Investment- und Hedge-Fonds fordern nur selten diese Steuern wieder ein, und auch Pensionsfonds könnten da noch viel herausholen“, sagt Everard. Für die Performance der Fonds wäre das ein wertvoller Gewinn.

After global regulators and lawyers discovered evidence of price-fixing by at least 15 companies between 2000 and 2006, a number of lawsuits were put together. Prior to BA’s $90 million settlement, Air France-KLM settled an $87 million last year.

However this is not the first time BA has had to settle a class action case against them. Four years ago British Airways pleaded guilty to being involved with a price fixing cartel which resulted in a fine of $300 million.

The latest fine for BA is rooted from their involvement between 2000 and 2006. The lawsuits and class actions following the investigations have resulted in fines of more than $1.5 billion amongst a number of airlines.

The airline industry is currently facing significant challenges. The rising cost of oil is making big dents in their profits and it looks set to continue. In addition services such as Skype do not require to fly everywhere on business.

Nevertheless, the airline industry is fiercely competitive and whichever airline adapts best to the current situation will succeed. Air travel is a global industry and it is very sensitive to economics, politics and nature.

BA is also yet to pay a fine from the OFT for £125.5 million which was initially agreed before the criminal investigation collapsed. The case was regarding the alleged price fixing, specifically in relation to passenger fuel surcharges.

US companies top list of unclaimed refunds, with $1.65bn shortfall

Foreign investors lost $17.39bn last year by failing to claim refunds on taxed dividends and income, according to tax specialist firm Goal Group.

According the group’s study, US investors chalked up the most losses with $1.65bn, followed by UK investors.

According to statistics from the IMF and global stock exchanges, the market capitalisation of global equities rose 79% between 2001 and 2009, while the value of crossborder equity investment rose 163% over the same period.

Stephen Everard, chief executive officer of Goal Group, believes that a substantial proportion of investors will lose a large portion of their gains by letting them languish in foreign tax regimes and failing to reclaim withholding tax.

He said: “All players in the fund management community should take the issue seriously and make every endeavour to enhance investors’ returns. Technology is widely available today to automatically perform the highly complex task of reclaiming withholding tax, a process which has to incorporate varying data, formats and procedures from a multiplicity of different legislatures around the globe.”

To read this article on the fDiIntelligence site please click here and follow the instructions.

UK investors are missing out on more than £1 billion through failing to reclaim tax on income from cross-border securities, according to a new report from GOAL Group.

GOAL said income earned on cross-border securities is subjected to withholding tax in the country of origin, but a portion of that tax may be reclaimed by custodians on behalf of their clients.

However, the company said that worldwide around 25% of reclaimable withholding tax lies unreclaimed in foreign tax systems every year, and pointed to a “clear opportunity” for custodians to increase the scope and efficiency of reclamation services.

The UK was second only to the United States in terms of unreclaimed tax. According to the report, US investors had £1.9 billion in unreclaimed tax outstanding last year, while the figure sat at more than £10.5 billion worldwide.

GOAL chief executive Stephen Everard said that as investors increasingly adopt global strategies a “substantial proportion” of their rightful returns will risk languishing in foreign tax regimes if the reclamation of withholding tax is not treated with the due attention it deserves.

“All players in the fund management community should take the issue seriously and make every endeavour to enhance investors’ returns. Technology is widely available today to automatically perform the highly complex task of reclaiming withholding tax, a process which has to incorporate varying data, formats and procedures from a multiplicity of different legislatures around the globe. So there is really no pretext for fund management and custodians not to harness these technology-based services to the benefit of their investor clients,” Everard said.

To read the article on the Pensions Age website click here!

Pension funds and other UK investors missed out on more than £1bn last year by failing to reclaim withholding tax on foreign investments, according to tax reclamation experts.

The withholding tax is levied on all cross-border securities, but a proportion – or in some cases all – of that tax can be reclaimed by custodians on behalf of their clients.

GOAL group put the figure for unreclaimed tax for global investors at £10.72bn – a quarter of all withholding tax that could potentially be clawed back.

GOAL chief executive Stephen Everard said the increasing popularity of cross-border share-holdings and the resurgence in equity dividend payments meant that levels of unreclaimed tax could continue to rise.

Everard said: “Since savvy investors are increasingly adopting a global investment strategy to maximise their earnings from securities – both equities and bonds – a substantial proportion of their rightful returns will risk languishing in foreign tax regimes if the reclamation of withholding tax is not treated with the due attention it deserves.”

KPMG partner Chris Morgan said the amount UK investors could claim back was potentially greater than £1bn a year.

“You do find very big discrepancies in what clients can claim under the existing double tax treaty and what they do claim,” he said.

“But there is another angle – tax regimes can be challenged.”

In 2009, KPMG successfully challenged the Dutch system using Strathclyde Pension Fund as a test case, paving the way for UK schemes to reclaim an additional £93m. (PP Online, 28 January, 2009)

The Dutch tax authorities accepted Strathclyde Pension Fund’s claims they should not have levied a withholding tax on dividend payments to tax exempt bodies – such as pension funds – located within the European Union but outside The Netherlands.

KPMG is currently challenging the French regime on behalf of investment fund clients. The case has been referred to the European Court.

“So there are two areas,” added Morgan. “There is checking existing rules, and there is the European law angle. That means there’s potentially a lot more at stake.”

To read this article on Professional Pension click here!

Two new surveys are warning that UK investors with overseas assets risk missing out on billions of pounds by failing to claim foreign dividend withholding tax (DWT) in cases where the UK has a double taxation agreement in place.

The tax specialist website taxback.com has calculated that only 7% of DWT is reclaimed globally. Taking into account the high net worth individuals, pension companies and life insurance companies who could be entitled to claim refunds, the company says ‘the amount of DWT being left on the table could be enormous’.

Seamus Murphy, senior tax manager at taxback.com, said: ‘If you translate this to those in the UK with overseas assets in their portfolios, the loss could be upwards of £1bn a year.’

These findings are backed up by a report from tax reclamation services specialist Goal Group, which calculates that £10.72bn of global investors’ returns from their cross-border shares and bonds are likely to be lost from last year’s earnings due to reclamation failures, representing a quarter of all reclaimable tax on cross-border securities.

Goal’s statistics suggest that UK investors lose around £1.02bn in this way, coming second behind the US. The company says that the value of cross-border equities investments rose 163% during 2001-09, nearly double the market rate.

Goal’s CEO, Stephen Everard, said: ‘Since savvy investors are increasingly adopting a global investment strategy to maximise their earnings from securities – both equities and bonds – a substantial proportion of their rightful returns will risk languishing in foreign tax regimes if the reclamation of withholding tax is not treated with the due attention it deserves.’

UK investors are losing out to the tune of billions, as losses on un-reclaimed tax on foreign dividend withholding tax (DWT) mount, according to two new sets of findings.

According to the tax specialist website taxback.com, UK investors are failing to claim up to GBP1.1bn in foreign DWT each year. In an instance where the UK has a double taxation agreement with the country in question, investors are entitled to reclaim the difference between the rate normally applied, and the reduced rate specified in the relevant treaty.

However, according to Seamus Murphy, senior tax manager at taxback.com, only 7% of DWT is reclaimed globally, meaning that, “if you translate this to those in the UK with overseas assets in their portfolios, the loss could be upwards of GBP1bn a year”. He added: “Many in the UK either don’t know they can reclaim or think it is too much hassle. But our system is straightforward and reclaims can go back at least three years and in some cases up to six years so will nearly always be worth doing.”

Murphy argues that, in particular, three groups of investors could be entitled to reclaims. They are: members of share plans where the parent company is a foreign entity; ISA investors whose plans are exempt from UK tax but not foreign DWT; and investors in UK companies that are subsequently taken over by foreign companies

Moreover, he said, “it is worth stressing that this is only the retail part of the market. There are many high-net-worth individuals out there, pension companies and life insurance companies who are also entitled to claim refunds, so the amount of DWT being left on the table could be enormous”.

Meanwhile, a new report from the tax reclamation services specialist GOAL Group shows similar findings. According to GOAL’s figures, GBP10.72bn of global investors’ returns from their cross-border shares and bonds are likely to be lost from last year’s earnings due to reclamation failures, representing a quarter of all reclaimable tax on cross-border securities.

GOAL’s statistics are slightly lower than taxback.com’s, showing that UK investors forfeit approximately GBP1.02bn in this way, coming second only to the US. Allegedly, an estimated 25% of reclaimable withholding tax remains unclaimed in foreign tax systems every year.

GOAL notes that, during 2001-09, the market capitalization of global equities rose 79%, whereas the value of cross-border equities investments rose 163% over the same period, meaning that cross-border shareholdings have risen at nearly double the market rate. GOAL argues that, in light of the increasing popularity of dividend payments and cross-border securities, unreclaimed tax will continue to rise unless reclamation levels improve.

GOAL’s CEO, Stephen Everard, stressed: “Since savvy investors are increasingly adopting a global investment strategy to maximise their earnings from securities – both equities and bonds – a substantial proportion of their rightful returns will risk languishing in foreign tax regimes if the reclamation of withholding tax is not treated with the due attention it deserves.”

He added: “All players in the fund management community should take the issue seriously and make every endeavour to enhance investors’ returns. Technology is widely available today to automatically perform the highly complex task of reclaiming withholding tax, a process which has to incorporate varying data, formats and procedures from a multiplicity of different legislatures around the globe. So there is really no pretext for fund management and custodians not to harness these technology-based services to the benefit of their investor clients.”

The loss represents about a quarter of about $64.4 billion in total reclaimable tax globally in 2010, according to the report. U.S. investors gave up the most, about $3.16 billion, in unclaimed withholding tax, followed by U.K. investors, who left an aggregate of about $1.65 billion on the table. Japanese investors lost out on a total of about $1.33 billion during the same year.

In certain jurisdictions, earned income from overseas securities is automatically subject to a withholding tax, but a portion of that tax can be reclaimed. As more investors diversify their portfolios by investing in overseas securities, the issue of unclaimed withholding tax becomes more significant as a portion of total returns, said Stephen Everard, CEO of the Goal Group, which provides support services to the financial sector including tax-related solutions.

“There’s still a lot of reclaimable withholding tax that’s languishing in foreign jurisdictions,” Mr. Everard said in a telephone interview. “There’s really no excuse for it with the technology available today (for custodians to perform the task of reclaiming withholding tax). At the end of the day, it’s your money.”

Mr. Everard added: “Investors should be demanding that their interests are fully protected.”

Investors, including institutional investors, lost an estimated $17.39 billion globally through unclaimed withholding tax from overseas stocks and bonds, according to a report by the Goal Group.

The loss represents about a quarter of about $64.4 billion in total reclaimable tax globally in 2010, according to the report. U.S. investors gave up the most, about $3.16 billion, in unclaimed withholding tax, followed by U.K. investors, who left an aggregate of about $1.65 billion on the table. Japanese investors lost out on a total of about $1.33 billion during the same year.

In certain jurisdictions, earned income from overseas securities is automatically subject to a withholding tax, but a portion of that tax can be reclaimed. As more investors diversify their portfolios by investing in overseas securities, the issue of unclaimed withholding tax becomes more significant as a portion of total returns, said Stephen Everard, CEO of the Goal Group, which provides support services to the financial sector including tax-related solutions.

“There’s still a lot of reclaimable withholding tax that’s languishing in foreign jurisdictions,” Mr. Everard said in a telephone interview. “There’s really no excuse for it with the technology available today (for custodians to perform the task of reclaiming withholding tax). At the end of the day, it’s your money.”

Mr. Everard added: “Investors should be demanding that their interests are fully protected.”

If you wish to find this article on Pensions and Investments click here

]]> http://thegoalgroup.wordpress.com/2011/05/18/investors-not-reclaiming-withholding-taxes-group-says-2/feed/ 0 gregjacobsuk pensions and investments http://thegoalgroup.wordpress.com/2011/05/16/investors-lose-17-39bn-of-returns-due-to-un-reclaimed-withholding-tax/ http://thegoalgroup.wordpress.com/2011/05/16/investors-lose-17-39bn-of-returns-due-to-un-reclaimed-withholding-tax/#comments Mon, 16 May 2011 09:00:59 +0000 Greg Jacobs http://thegoalgroup.wordpress.com/?p=1141 ]]> 16 May 2011 – Stephanie Baxter

According to a report by Goal Group, global investors are forfeiting returns from their cross-border securities because withholding tax on dividends and income is not being properly reclaimed.

- US investors came top with losses of $3.24bn

- “Clear opportunity” for custodians to increase efficiency of reclamation services

- Fund managers “should” use technology-based services to perform the “complex” process

Investors are losing returns because withholding tax on dividends and income is not being correctly reclaimed, according to a new report by Goal Group.

The report shows that global investors are likely to have lost $17.39bn (£10.72bn) of returns from their cross-border shares and bonds in 2010, while US investors suffered the most with losses of $3.24bn (£1.95bn). UK investors forfeited $1.65bn (£1.02bn), while Japan came third with $1.33bn (£0.81bn)

Goal Group claims that lost returns through un-reclaimed tax have risen substantially as cross-border shareholdings have become increasingly popular. Unless reclamation levels improve, un-reclaimed tax will keep rising. According to the report, around 25% of reclaimable withholding tax lies un-reclaimed in foreign tax systems each year.

Although several leading custodians have already recognised the market opportunities of effective tax reclamation services, there is “clear opportunity” for custodians to increase the range and efficiency of reclamation services, the group said.

Stephen Everard, the group’s CEO, called for fund managers and custodians to take the issue seriously and try to enhance investors’ returns as much as possible.

He went on to say that technology is available to automatically execute the “highly complex” task of reclaiming withholding tax which involves incorporating different forms of data, formats and procedures from a multitude of different legislatures around the world.

“So there is really no pretext for fund management and custodians not to harness these technology-based services to the benefit of their investor clients,” Everard added.

To read this article on the Fundamenyals website Click Here

Global cross border investment losses on unreclaimed withholding tax have reached £10.72 billion, a new report reveals.

UK investors alone, have relinquished more than £1 billion in their rightful returns, according to the report from GOAL Group, the leading tax reclamation services specialist.

It says that around a quarter of all reclaimable tax on cross border shares and bonds are likely to be lost from last year’s earnings because withholding tax on dividends and income is not being properly reclaimed.

As cross border shareholdings have become more popular, lost returns through unreclaimed tax have escalated at a significant rate since 2005 when GOAL last examined the situation. According to statistics from the International Monetary Fund and from global stock exchanges, the market capitalisation of global equities rose 79% between 2001 and 2009, whereas the value of cross-border equities investments rose 163% over the same period. Cross border shareholdings have therefore risen at something around double the market rate, it points out.

Also 2010 saw a resurgence in equity dividend payments as markets grow and this trend is likely to continue in 2011 amid enhanced corporate confidence and economic recovery, the report adds. In parallel, the value of bonds listed on global markets has escalated across the decade. In light of the increasing popularity of dividend payments and cross border securities, unreclaimed tax will continue to rise unless reclamation levels improve.

Income earned on cross border securities is subjected to withholding tax in the country of origin, but a portion of that tax may be reclaimed by custodians on behalf of their clients. Many leading custodians have already recognised the market opening represented by effective tax reclamation services, both for their FM clients, and as an interbank services opportunity. But with around 25% of reclaimable withholding tax lying unreclaimed in foreign tax systems every year, there is a clear opportunity for custodians to increase the scope and efficiency of reclamation services.

‘As the global economy continues to gain steam, companies are eager to demonstrate to investors, through dividend payments, that they have put the financial crisis behind them and are now well into the recovery mode in 2011,’ said Stephen Everard, chief executive officer, GOAL Group.

‘Since savvy investors are increasingly adopting a global investment strategy to maximise their earnings from securities, both equities and bonds, a substantial proportion of their rightful returns will risk languishing in foreign tax regimes if the reclamation of withholding tax is not treated with the due attention it deserves,’ he explained.

‘All players in the fund management community should take the issue seriously and make every endeavour to enhance investors’ returns. Technology is widely available today to automatically perform the highly complex task of reclaiming withholding tax, a process which has to incorporate varying data, formats and procedures from a multiplicity of different legislatures around the globe. So there is really no pretext for fund management and custodians not to harness these technology-based services to the benefit of their investor clients,’ he added.

To read this article on the Investment International website Click Here

According to a report by Goal Group, global investors are forfeiting returns from their cross-border securities because withholding tax on dividends and income is not being properly reclaimed

- US investors came top with losses of $3.24bn

- “Clear opportunity” for custodians to increase efficiency of reclamation services

- Fund managers “should” use technology-based services to perform the “complex” process

Investors are losing returns because withholding tax on dividends and income is not being correctly reclaimed, according to a new report by Goal Group.

The report shows that global investors are likely to have lost $17.39bn (£10.72bn) of returns from their cross-border shares and bonds in 2010, while US investors suffered the most with losses of $3.24bn (£1.95bn). UK investors forfeited $1.65bn (£1.02bn), while Japan came third with $1.33bn (£0.81bn)

Goal Group claims that lost returns through un-reclaimed tax have risen substantially as cross-border shareholdings have become increasingly popular. Unless reclamation levels improve, un-reclaimed tax will keep rising. According to the report, around 25% of reclaimable withholding tax lies un-reclaimed in foreign tax systems each year.

Although several leading custodians have already recognised the market opportunities of effective tax reclamation services, there is “clear opportunity” for custodians to increase the range and efficiency of reclamation services, the group said.

Stephen Everard, the group’s CEO, called for fund managers and custodians to take the issue seriously and try to enhance investors’ returns as much as possible.

He went on to say that technology is available to automatically execute the “highly complex” task of reclaiming withholding tax which involves incorporating different forms of data, formats and procedures from a multitude of different legislatures around the world.

“So there is really no pretext for fund management and custodians not to harness these technology-based services to the benefit of their investor clients,” Everard added.

To read this article on the Tax Rates website Click Here

Key Findings

- $17.39 billion (£10.72bn/€12.24bn) of investors’ rightful returns from their foreign shares and bonds were lost in the latest financial year because withholding tax on dividends and income is not being properly reclaimed.

- This represents an increase of over 50% in the annual amount lost compared with 2006 when GOAL last published an analysis of the situation

- In other words, of the total $64.4billion (£39.69bn/€45.33bn) of reclaimable tax in 2010, around a quarter is currently being left unreclaimed

- The United States ($3.16bn/£1.95bn/€2.22bn) is the biggest annual loser from unreclaimed withholding tax on foreign securities, followed by the UK ($1.65bn/ £1.02bn/€1.16bn), Japan ($1.33bn/£820m/€936m), Luxembourg ($1.25bn/£770m/€880m), France ($1.14bn/£703m/€802m), and Germany ($982m/£605m/€691m)

- The problem is likely to increase as dividend payments become more popular and a more significant element of shareholder returns

- Also a rising proportion of portfolio investment devoted to foreign securities means that lack of tax reclamation needs urgent attention from fund managers and custodian banks

- Investors are becoming increasingly rigorous in their scrutiny of investments and are putting pressure on fund managers to provide greater transparency

- Tax reclamation rates, rules and timings vary widely around the globe, making the reclamation process very complex. However, automated systems are now available to take the cost and manual complexity out of the reclamation process. Fund managers and pension funds are also increasingly aware of the existence of such systems and are beginning to include the requirement for such automated facilities as a standard part of their custodian services RFPs

- Leading custodians have recognised the market opening represented by effective tax reclamation services, both for their FM clients, and as an interbank services opportunity. Automated reclamation facilities have now made the provision of such services highly profitable, in a market climate where other revenue streams are declining

Introduction
Since the late 1990s, equities investment has been through significant peaks and troughs.  Hyped to unsustainable values in the dotcom boom, the post-millennial stock market crash then wiped billions off portfolio values. Growth throughout the ‘noughties’ was followed by a similar radical depression in capital values in 2008 financial markets crisis and its aftermath.  Since that time, equities have recovered strongly, although the total market capitalisation of stock exchanges around the world in early 2011 has yet to regain the peaks of $60+ trillion reached in late 2007. Growth is once again strong, but apparently more sustainable and logically based on solid results rather than unrealistic projections. Institutional investments, which fled into fixed income instruments during the financial markets crisis, are now rebalancing their portfolios back into equities, using the stellar growth of stocks and shares during 2010 to offset at least some of the losses they sustained in the previous couple of years.

Throughout the first decade of the new millennium, earnings from dividend payments have grown. Even taking into account the natural suppression of dividends paid after the financial markets crisis, in line with suppressed profits, the culture of the dividend is far stronger now, compared with the nineties, when returns were often predicated solely on capital growth.

The importance of dividends
Looking historically, a watershed moment arrived in 2003 when Microsoft announced its first ever dividend. Since then, dividend payouts have steadily increased in popularity until the financial markets crisis. Then came a natural downturn. Dividend increase announcements were in decline even before the liquidity crisis as companies relied on the greater flexibility of share buybacks to return cash to investors. One commentator  has noted that in reality, dividend increases are driven not by excess cash, but instead by a good economic and market environment. Yet to award dividends solely when times are good creates the least favourable impression on investors. Analysis of dividend reduction during the recent liquidity crisis reveals that investors indiscriminately punished companies cutting dividends during the panic in the second half of 2008 but rewarded dividend reductions in the first half of 2009 as they became comfortable with companies shoring up liquidity buffers in the tough economic and funding environment. Learning from this experience, an increasing number of astute corporates are now starting to use their dividend payments as a proactive tool to manage investor opinion and enthusiasm – in other words, as an investor marketing tool.

Some years ago, research by Dresdner Kleinwort Wasserstein  delivered some key figures that firmly punctured the popular notion that long-term equities gains come from capital growth. The bank’s study told us that: in Europe since 1970, 70% of total equity returns have been derived from dividend yield; and between 1950 – 2000, the average contribution by Europe (excluding UK) of dividend yield to total equity returns has been 62%. The research then goes on to state that the bank saw dividend yield once again becoming the greater proportion of equity returns in the future.

In a bull market, investors often tend to focus on capital growth and thus run the risk of overlooking dividends as a vital component of company return. Indeed, the Barclays Equity Gilt Study 2010 has exemplified that receiving and reinvesting dividends is by far the biggest source of an investor’s return in the long term. The study shows that £100 invested in equities and gilts at the end of World War II would have been worth just £5,721 at the end of 2008 in nominal terms. But by reinvesting the gross dividends, the same £100 would have grown to £92,460.

Indicators are now showing a major resurgence in dividend payments as the markets grow strongly. One major index provider in the U.S.  has reported that across the 7,000+ publicly owned companies whose dividends it tracks, only 28 decreased their dividend payment during the fourth quarter of 2010, marking a continued improvement from the 74 that lowered their dividend payment during the fourth quarter of 2009. Dividend increases rose 43.8% during the fourth quarter to 696 from the 484 recorded during the fourth quarter of 2009. For the year, 145 issues have decreased their dividend payment compared to 804 in 2009, with the associated decrease of income being $2.8 billion for 2010 (versus $58.0 billion in 2009). Increases rose to 1729 from the 1191 registered in 2009 with the aggregate adding $29.4 billion in increases compared to $15.6 billion in 2009.

Similarly, investors in the UK also enjoyed the return of healthy dividend payouts last year. The FTSE 100 accounted for almost 90 per cent of UK dividends paid in 2010, but mid-cap companies have increased their payouts at a faster rate. According to a report published earlier this year by Capita Registrars , dividends from the FTSE 250 rose 16.3 per cent last year, while dividend growth from the FTSE 100 was only 6.8 per cent across the same period. Nevertheless, companies in the FTSE 250 only paid out £5.1 billion last year compared to a colossal £49.8 billion shared out by corporate behemoths in the FTSE 100.

Outlook on dividends
As 2010 has seen a healthy upswing in dividend policies, this trend is likely to continue in 2011 amid enhanced corporate confidence and economic recovery. Capita Registrars has recently raised its forecast on this year’s dividend payments from listed UK companies to £64.2 billion, nearly 8 per cent higher than the total £56.6 billion payout in 2010.

The return of the oil giant BP to the dividend list has also boosted the prospect on dividend increase in the UK. The oil group has reinstated investor payments in February this year after its suspension of dividend payout following the wake of the Deepwater Horizon accident. The oil group’s importance to income investors is substantial since it was the seventh-largest dividend player in the UK last year despite the fact that it made only one payment in 2010.

Admittedly, if and how fast the dividend markets will return to the 2007/2008 pre-crisis levels will largely be contingent on the global economic environment. But as the global economy continues to gain steam, companies will be eager to demonstrate to investors that they are well into the recovery mode in 2011 through dividend increase and investors are all the more likely to witness more dividend raise with even fewer decreases this year.

Cross-border Investing
Not only are equities back in fashion, but interest in cross-border investing is also on the rise.  According to the statistics from the International Monetary Fund and from global stock exchanges, the market capitalisation of global equities rose 79% between 2001 and 2009, whereas the value of cross border equities investments rose 163% over the same period.

So cross-border shareholdings have risen at something around double the market rate, showing that fund managers have increased the proportion of foreign shares in their portfolio from around 20% in 2001, to more like 28% in 2009. The market capitalisation of the global equities markets (excluding investment funds) is currently around the $55 trillion mark. By comparison, the average proportion of foreign shares in a fund manager’s equities portfolio is in the region of 20-30%.

The United States has the largest, most diversified debt securities markets in the world and a substantial amount of global capital is being invested in the US annually. Even though both US and foreign investors did reduce their holdings of cross-border securities and foreign deposits during the financial crisis due to risk aversion, the adjustments in cross-border portfolio holdings were relatively minor compared with the substantial valuation losses that investors faced. As of June 30, 2010, foreign holdings of US securities have again risen to $10,701 billion from $9,641 billion from June 30, 2009.

Fixed-income
The subject of this GOAL study covers cross-border investment in all securities – equities and bonds. The fixed-income market has been very much the beneficiary of the equities market’s crisis of confidence in 2008, with the value of domestic bonds listed on global markets rising to over $63 trillion at the end of 2009 (the International Federation of Stock Exchanges’ latest most recent globally reliable measurement point).  As banks remained reluctant to lend following the financial markets turmoil, companies competed to raise funds in the bond markets by taking advantage of historic low interest rates since at least 2005. A shift in funding strategy has been slowly emerging among companies as they begin to realise the need to diversify funding sources in light of tight credit lines. According to Investec, about £350bn of investment-grade loans mature during 2011-14 in the UK, a gigantic volume for the bank loan market alone to cover. The uncertainty around companies’ ability to refinance this record amount of debt they issued during the boom years has further prompted them to seek diversified funding channels.

While US companies have long favoured bond market funding, European companies tend to raise the majority of their finance from bank debt. However, a growing proportion of European corporate funding has come from the bond market since 2008, heralding a change in European companies’ attitude

towards bond market funding. A massive surge in European bond issuance was observed in 2009 with an increase in the average size of the offerings. Non-financial issuer bond offerings were 75 per cent bigger at $1.1 billion from $600 million whereas financial issuers sold an average $1 billion, a 56 per cent increase on the $645 million average size of offering seen over the same period in 2008.

Growing appetite in the bond markets for smaller issues, from higher risk or so-called junk-rated borrowers, has allowed a broader swathe of mid-market companies to take part in the bond market frenzy. Indeed, the UK Treasury has already been examining ways to improve access to sterling bond markets for more speculative grade borrowers.

Outlook on the fixed-income market
As the equity markets crashed in 2008-09, funds poured into the debt markets. With the huge and sudden demand, prices on the secondary market soared, and yields on the primary market plummeted. According to Barclays Capital indices, the average yield for US investment-grade bonds has fallen from about 6 per cent in June 2007 to 3.75 per cent in September 2010. Euro investment-grade bonds also showed a similar trend, with average yield falling from more than 5 per cent before the financial crisis to about 3.25 per cent. But the desire for yield has not disappeared against the background of low interest rates.  Investors are continuing to receive a high premium for owning corporate bonds relative to government bonds. At the peak of 2009, investment-grade bonds were offering a six-percentage yield spread over government bonds.

There has already speculation last year about whether the flow of investors’ money into bond funds was going to slow down any time soon. Considering the absolute interest rates at all time low levels, some believe that the bond market has already reached the market top; but another school of thought opines that investors are relying on spreads (which are still much higher than the historic average) to evaluate the market, as opposed to absolute yields, and the current prices can therefore not yet reflect a market top. Indeed, the Federal Reserve just embarked on another round of quantitative easing in November last year, buying $600 billion more in Treasury bonds to push government bond yields lower to encourage borrowing and boost sluggish economic growth.

The forward outlook for earnings on gilts is now being debated between various commentators, one of whom noted, “the global savings glut (or investment dearth) has depressed gilt yields. It’s possible that, as these factors weaken, bond yields could rise without jeopardizing equities simply because the bond-earnings yield ratio returns towards normal. Even if ten year gilt yields were to rise to five per cent, this ratio would still be well below its pre-crisis levels .”

Withholding Tax and Reclamation Rates
To summarise so far, then, more and more companies are now paying a dividend. Those who have historically done so are looking to increase the dividend payout year-on-year. And according to Standard and Poors, this trend is expected to continue strongly through 2011 and beyond.

Holding cross-border shares is also becoming more popular with fund managers. The growth in foreign equity holdings between 2001 and 2009 was more than double the growth in global stock markets capitalisation over the same period. This shows that fund managers are increasing the proportion of their portfolio made up by foreign shares.

Bond market activity has increased markedly since the global stock market nadir of 2008.  This increase in debt securities may or may not continue to grow at the same rate in future years, but has introduced a new balance into the fixed-income vs. equities portfolio balance.

At all events, dividends on cross-border shares and yield from foreign bonds are subject to withholding tax . This is a tax on earnings that the country’s tax office (the country in which the share or bond is issued) deducts at source, a proportion of which can be reclaimed by the owner of the shares/bonds.

However, GOAL’s research shows that around 25% of that reclaimable tax is left unreclaimed. This amounts to more than $17 billion of shareholder returns that are being lost – left unreclaimed in a foreign country’s tax system.

Pressure on FMs and Custodians
With the increasing popularity of both dividend payments, and cross-border securities, the
unreclaimed tax will continue to rise unless fund managers’ service providers – often custodian banks – improve reclamation levels. Increasingly savvy investors, in markets where high yield investments are harder to come by, are putting the fund management community under growing pressure to maximise their investment returns.

As a result of all these factors, dividend yields have become a far more highly scrutinised element of the investor’s portfolio, with consequent pressure on fund managers to devote greater attention to maximise this element of return in the portfolios they are managing. The significance of unreclaimed withholding tax on cross-border securities holdings has therefore risen to a prominence it has not enjoyed since the nineties and earlier ‘noughties’. However, technology was not available back then to automatically perform the highly complex task of reclaiming withholding tax, a process which has to incorporate up to date information, formats and procedures from a multiplicity of different legislatures around the globe.

In contrast to the last period of attention enjoyed by the faithful dividend, technology solutions are now widely available to automate the process of withholding tax reclamation, making it an economic – indeed profitable – process for custodians, and a ‘must have’ for fund managers under pressure from their investor clients.

Method
GOAL Group combined its own proprietary information on withholding tax reclamation rates with a wide range of global sources on foreign portfolio investment and dividend payments in different markets around the world.  This information was then used, along with up-to-date information on the complex picture of withholding/reclaimable rates by country, to calculate actual sums left unreclaimed, both globally, and for individual countries with the larger investor communities.

Sources
*    GOAL Group proprietary data
*    Global Stock Exchanges
*    The International Monetary Fund
*    The OECD
*    The Bond Market Association
*    Global top 50 banks
*    The Federal Reserve
*    The European Central Bank
*    The Bank of England
*    US Department of the Treasury
*    The Investment Management Association
*    The World Bank
*    Moody’s
*    Bloomberg
*    Standard and Poors
*    Citytext
*    International Financial Services Association
*    Institute of International Finance
*    World Federation of Exchanges

SEverard@goalgroup.com
www.goalgroup.com

09 May 2011 – Hannah Beechman

£10.72 billion of investors’ returns from their cross-border shares and bonds stand to be lost in the latest financial year because withholding tax is not being properly reclaimed, according to tax reclamation specialists, GOAL Group.

To read this article on the IFA Online website Click Here

Cross-border shareholdings have become more popular and lost returns through un-reclaimed tax have also spiralled and are considerably higher than when the company last looked at the issue back in 2005.

To read this article on the Expat News website Click Here

Pension Funds Online – 3^rd April 2011

Earlier this year, seventy of the world’s largest pension schemes and institutional investors sent a letter to the US Securities and Exchange Commission (SEC). In it, they asked SEC to put forward a case to Congress calling for a return to the days of investors being able to pursue non-US corporations for fraudulent activity in American courts.

The letter, which was signed by investors collectively running more than $2tn in assets, asks the SEC to help restore the rights of investors to sue in cases where there is a “significant link to the US”. It was sent in response to a study concerning extraterritorial private rights of action which will be presented by the SEC to Congress early next year.

The investors, which include Britain’s Royal Mail Pension Plan, Dutch pension provider PGGM and Denmark’s public pension plan ATP, say that last year’s Supreme Court ruling in the Morrison v. National Australia Bank case, prevents them from claiming that which they believe is rightfully theirs.

Private lawsuits over transnational fraud have almost come to a halt since the Morrison decision. It determined that investors cannot sue non-US corporations for fraud if company shares were bought on a foreign exchange even if the alleged misconduct took place on US soil.

Previous to the landmark ruling which changed investors’ rights, the court allowed plaintiffs to join the class action litigation if it “was satisfied…if a substantial part of the wrongful conduct occurred in the US, the wrongful conduct substantially affected the US, or if some substantial mixture of the two appeared”.

A number of global pension funds are determined to have the new rule overturned, partly because they see it as a simple case of fulfilling their duties as trustees.

“As worldwide asset managers we need to make sure we uphold the responsibilities that are trusted upon us by our members,” explains Harmen Geerts, press officer for Dutch pension fund APG. “The US had a system in place with regards to class actions which really worked and we are asking the SEC for a return to those times.”

Owen Thorne, investment officer at Merseyside pension fund, gives similar reasons for Merseyside’s involvement. “We participate in these cases to live up to our fiduciary responsibilities,” he says. “We have a responsibility to do what we can to claim the money back.”

Merseyside has participated in various class action cases, the most memorable being the case against RBS, for which they were denied the status of lead plaintiff for similar reasons as in the Morrison case. The fund was not appointed the status because it wasn’t clear if a foreign investor involved in an F-cubed action would be a good choice. The term ‘F-cubed’ refers to the foreign nature of the claim: foreign investors, foreign issuers, and the alleged fraudulent conduct taking place in a foreign country.

Thorne, however, also says that he still believes that as a general principle the US system is the most suitable to hold a company’s management accountable if fraud is thought to have taken place.
Beata Gocyk-Farber, a partner at specialist law firm Bernstein Litowitz Berger and Grossmann, who helped set up the letter, says her firm dealt with over 50 letters to the SEC, all petitioning for a return to former rules. “They weren’t all from foreign investors, some cases with US investors are also (affected) by the decision. If they didn’t buy the securities in the US on the US stock exchange then that’s it.”

So what chance do the pension funds have? Asked why Congress would be against a U-turn on the legislation, Gocyk-Farber says that there is a belief in some quarters that US law should not apply outside the country. But she dismisses it as an argument that can be used when it comes to private litigation: “If the conduct happened here than the conduct and effects test [the former measurement used to determine if a plaintiff had a right to sue in the US] should be sufficient.”

“We live in a global world,” she says. “The US has to be careful that it will not be seen as a haven for misconduct.”

Not just about the money

Annette van der Krogt, head of responsible investing at Syntrus Achmea, says that it is not just important for the American class action system to remain in use for European institutional investors in order to reclaim their lost assets, but also a way to create better standards in the industry.

“We see it as a way to improve corporate governance as well,” she says. “It isn’t just about the money. The US just has a more advanced class actions system in place than anywhere else and currently a lot of investors are affected by the ruling.”

Thorne agrees, claiming that in the US class action cases are a way to create better corporate governance as they do not have the same rules as for example in the UK. “We find the Dodd-Frank reforms [of which this SEC study is part] to increase corporate governance in the US a step in the good direction.”

The pension schemes and other mostly pan-European and Australian investors, who signed the letter, say that upholding the current status of the class action system could damage the reputation of US investors and could harm trade. They also warn that the decision of the court could affect, amongst others, the case against BP.

The oil giant has its primary listing on the London Stock Exchange and a secondary listing in New York. The fact that many of the foreign plaintiffs will have bought BP shares in London would exclude them from the class action, according to the ruling.

“The BP case just offers an example of why our (this) is needed. We feel investors should have the right to sue and should not be excluded from important cases such as this one,” says Geerts.

Stephen Everard, managing director of the Goal Group, says the letter seems to be just the beginning of an “extremely lengthy process”.

“These are all major investors and they make some valid and strong points. It will be very interesting to see the response of the SEC. The letter shows what the consequences can be if the court upholds the Morrison decision as a precedent for further litigation,” he says.

“At the moment big cases are pending or are thrown out of the US courts. It is not only the BP case, there are others as well, such as Vivendi and RBS, which have been affected.”

Everard explains that only the Supreme Court or Congress can overturn the decision but says that the pension schemes have a much stronger case with the SEC on their side. “This is an unusual thing, such a large group of angry investors coming together to take action. And they could get even bigger if they needed to make a stronger case for the courts. No doubt many other pension schemes would be very willing to sign (the letter).”

Investors lost out on nearly £11bn ($18bn) from global cross-border investments as a result of unclaimed withholding tax last year.

This accounts for more than a quarter of the near-£40bn of global reclaimable withholding tax on dividends for 2010, according to research carried out by Goal Group, a specialist in tax reclamation.

“Fund managers and trustees should take responsibility for this. Fund managers should do this as part of their corporate governance,” said Stephen Everard, managing director.

US investors were the biggest losers last year with nearly £2bn of the withholding tax levied on income from their foreign equity and bond holdings that remained unclaimed, followed by the UK with more than £1bn, Japan £820m, Luxembourg £770m and France, with more than £700m.

The overall sum lost to investors has risen 50 per cent since 2006, the last time the survey was carried out. Mr Everard said it was essential that custodian banks took action to curb escalating losses.

“Most big custodian banks have the capability to follow unclaimed withholding tax but smaller custodians and prime brokers do not do it as it is labour intensive,” he added.

To read this article on the FT website please click here

Investors are likely to miss out on nearly £11bn from their cross-border shares and bonds from last year because withholding tax on dividends and income is not being properly reclaimed, according to a recent report.

The study, conducted by tax reclamation specialist Goal Group, found that US investors are likely to chalk up the highest losses, with around $3.164bn left un-reclaimed by investors, while UK investors are set to lose out on £1.65bn. The total figure represents nearly a quarter of all reclaimable tax on cross-border securities.

Goal said, as cross-border shareholdings have become more popular, lost returns through un-reclaimed tax have also escalated and are significantly higher than in 2005, when the company last examined the issue.

It added that, according to statistics from the International Monetary Fund and from global stock exchanges, the market capitalisation of global equities rose 79% between 2001 and 2009, whereas the value of cross-border equities investments rose 163% over the same period. Cross-border shareholdings have therefore risen at around double the market rate.

Furthermore, Goal said last year also saw a resurgence in equity dividend payments as markets grew and that this trend is likely to continue in 2011 amid enhanced corporate confidence and economic recovery.

In parallel, the value of bonds listed on global markets has escalated across the decade. In light of the increasing popularity of dividend payments and cross-border securities, Goal said un-reclaimed tax will continue to rise unless reclamation levels improve.

Stephen Everard, chief executive officer, Goal Group, said: “Savvy investors are increasingly adopting a global investment strategy to maximise their earnings from securities – both equities and bonds – a substantial proportion of their rightful returns will risk languishing in foreign tax regimes if the reclamation of withholding tax is not treated with the due attention it deserves.”

To read this article on the International Adviser website Click Here

Investors are likely to miss out on nearly £11bn from their cross-border shares and bonds from last year because withholding tax on dividends and income is not being properly reclaimed, according to a recent report.

The study, conducted by tax reclamation specialist Goal Group, found that US investors are likely to chalk up the highest losses, with around $3.164bn left un-reclaimed by investors, while UK investors are set to lose out on £1.65bn. The total figure represents nearly a quarter of all reclaimable tax on cross-border securities.

Goal said, as cross-border shareholdings have become more popular, lost returns through un-reclaimed tax have also escalated and are significantly higher than in 2005, when the company last examined the issue.

It added that, according to statistics from the International Monetary Fund and from global stock exchanges, the market capitalisation of global equities rose 79% between 2001 and 2009, whereas the value of cross-border equities investments rose 163% over the same period. Cross-border shareholdings have therefore risen at around double the market rate.

Furthermore, Goal said last year also saw a resurgence in equity dividend payments as markets grew and that this trend is likely to continue in 2011 amid enhanced corporate confidence and economic recovery. In parallel, the value of bonds listed on global markets has escalated across the decade. In light of the increasing popularity of dividend payments and cross-border securities, Goal said un-reclaimed tax will continue to rise unless reclamation levels improve.

Stephen Everard, chief executive officer, Goal Group, said: “Savvy investors are increasingly adopting a global investment strategy to maximise their earnings from securities – both equities and bonds – a substantial proportion of their rightful returns will risk languishing in foreign tax regimes if the reclamation of withholding tax is not treated with the due attention it deserves.”

To read this article on the International Adviser website Click Here

Since that time, equities have recovered strongly, although the total market capitalisation of stock exchanges around the world in early 2011 has yet to regain the peaks of $60+ trillion reached in late 2007. Growth is once again strong, but apparently more sustainable and logically based on solid results rather than unrealistic futures. Institutional investments, which fled into fixed income instruments during the financial markets crisis, are now rebalancing their portfolios back into equities, using the stellar growth of stocks and shares during 2010 to offset at least some of the losses they sustained in the previous couple of years.

Throughout the first decade of the new millennium, earnings from dividend payment have grown. Even taking into account the natural suppression of dividends paid after the financial markets crisis, in line with suppressed profits, the culture of the dividend is far stronger now, compared with the nineties, when returns were often predicated solely on capital growth.

The importance of dividends
Looking historically, a watershed moment arrived in 2003 when Microsoft announced its first ever dividend.  Since then, dividend payouts have steadily increased in popularity until the financial markets crisis.

Then came a natural downturn. Dividend increase announcements were in decline even before the liquidity crisis as companies relied on the greater flexibility of share buybacks to return cash to investors. One commentator¹ has noted that in reality, dividend increases are driven not by excess cash, but instead by a good economic and market environment.

Yet to award dividends solely when times are good creates the least favourable impression on investors. Analysis of dividend reduction during the recent liquidity crisis reveals that investors indiscriminately punished companies cutting dividend during the panic in the second half of 2008 but rewarded dividend reductions in the first half of 2009 as they became comfortable with companies shoring up liquidity buffers in the tough economic and funding environment. Learning from this experience, an increasing number of astute corporates are now starting to use their dividend payments as a proactive tool to manage investor opinion and enthusiasm – in other words, as an investor marketing tool.

Some years ago, research by Dresdner Kleinwort Wasserstein² delivered some key figures that firmly punctured the popular notion that long-term equities gains come from capital growth. The bank’s study told us that: in Europe since 1970, 70% of total equity returns have been derived from dividend yield; and between 1950 – 2000, the average contribution by Europe (excluding UK) of dividend yield to total equity returns has been 62%. The research then goes on to state that the bank sees dividend yield once again becoming the greater proportion of equity returns in the future.

Indicators are now showing a major resurgence in dividend payments as the markets grow strongly. One major index provider in the U.S.³ has reported that across the 7,000+ publicly owned companies whose dividends it tracks, only 35 decreased their dividend payment during the third quarter of 2010 marking a continued, dramatic improvement from the 135 that lowered their dividend payment during the third quarter of 2009. Dividend increases rose 56% during the third quarter to 299 from the 191 recorded during the third quarter of 2009.

Year-to-date, 117 have decreased their dividend payment compared to 730 for the corresponding period last year. 1033 issues have increased their rate so far this year, a 46% gain over the 707 issues that did so last year. The same commentator also reported that, on a dollar-weighted basis, the first nine months of 2010 saw a net gain in annual dividend rates of $18.5 billion compared to a $45.7 billion decline in rates during the comparable period of 2009⁴. This is substantial growth indeed.

Cross-border Investing
Not only are equities back in fashion, but interest in cross-border investing is also on the rise.  According to the statistics from the International Monetary Fund and from global stock exchanges, the market capitalisation of global equities rose 79% between 2001 and 2009, whereas the value of cross border equities investments rose 163% over the same period.

So cross-border shareholdings have risen at something around double the market rate, showing that fund managers have increased the proportion of foreign shares in their portfolio from around 20% in 2001, to more like 28% in 2009. The market capitalisation of the global equities markets (excluding investment funds) is currently around the $55 trillion mark. By comparison, the average proportion of foreign shares in a fund manager’s equities portfolio is in the region of 20-30%.

Fixed-income
The subject of this GOAL study covers cross-border investment in all securities – equities and bonds. The fixed-income market has been very much the beneficiary of the equities market’s crisis of confidence in 2008, with the value of bonds listed on global markets rising from $14 trillion in 2001, to over $63 trillion at the end of 2009 (the latest IMF’s most recent globally reliable measurement point).

Whether growth in issuance will continue, and how strongly, is a moot point. As the equity markets crashed in 2008-9, funds poured into the debt markets.  With the huge and sudden demand, prices on the secondary market soared, and yields on the primary market plummeted. The forward outlook for earnings on gilts is now being debated between various commentators, one of whom noted, “the global savings glut (or investment dearth) has depressed gilt yields. It’s possible that, as these factors weaken, bond yields could rise without jeopardizing equities simply because the bond-earnings yield ratio returns towards normal. Even if ten year gilt yields were to rise to five per cent, this ratio would still be well below its pre-crisis levels.⁵”

Withholding Tax and Reclamation Rates
More companies are now paying a dividend. Those who have historically done so are looking to increase the dividend payout year-on-year. And according to Standard and Poors, this trend is expected to continue strongly through 2011 and beyond.

Holding foreign shares is also becoming more popular with fund managers. The growth in foreign equity holdings between 2001 and 2009 was more than double the growth in global stock markets capitalisation over the same period. This shows that fund managers are increasing the proportion of their portfolio made up by foreign shares.

Bond market activity has increased markedly since the global stock market nadir of 2008.  This increase in debt securities may or may not continue to grow at the same rate in future years, but has introduced a new balance into the fixed-income vs. equities portfolio balance.

At all events, dividends on foreign shares and yield from foreign bonds are subject to withholding tax⁶. This is a tax on earnings that the country’s tax office (the country in which the share or bond is issued) deducts at source, a proportion of which can be reclaimed by the owner of the shares/bonds.

However, GOAL’s research shows that around 25% of that reclaimable tax is left unreclaimed. This amounts to some $16-17 billion of shareholder returns that are being wasted – left unreclaimed in a foreign country’s tax system. This represents a 50% increase in the annual amount wasted compared with 2005 when GOAL last conducted an analysis of the situation.

Pressure on FMs and Custodians
With the increasing popularity of both dividend payments, and cross-border securities, the unreclaimed tax will continue to rise unless fund managers’ service providers – often custodian banks – improve reclamation levels. Increasingly savvy investors, in markets where high yield investments are harder to come by, are putting the fund management community under growing pressure to maximise their investment returns.

As a result of all these factors, dividend yields have become a far more highly scrutinised element of the investor’s portfolio, with consequent pressure on fund managers to devote greater attention to maximise this element of return in the portfolios they are managing.

The significance of unreclaimed withholding tax on cross-border securities holdings has therefore risen to a prominence it has not enjoyed since the ‘nineties and earlier ‘noughties. Back then, however, technology was not available to automatically perform the highly complex task of reclaiming withholding tax, a process which has to incorporate up to date information, formats and procedures from a multiplicity of different legislatures around the globe.

In contrast to the last such period of attention enjoyed by the faithful dividend, technology solutions are now widely available to automate the process of withholding tax reclamation, making it an economic – indeed profitable – process for custodians, and a ‘must have’ for fund managers under pressure from their investor clients.

1. CEB Views, Dividend Trends and Market Reactions, 25 November 2010
2. Dresdner Kleinwort Wasserstein, DrKW launches new Pan-European Income Service Research, Jan 2004
3. Standard and Poor’s, Dividend Record, 4 October 2010
4. ibid
5.Investors Chronicle, Shares shrug off rising gilt yields, 4 Jan 2011
6. See, for instance, definitions at www.goalgroup.com, or at http://www.ubs.com/1/e/ubs_ch/wealth_mgmt_ch/company/c_tax/backtax.html

Stephen Everard

Managing Director

GOAL group

The alliance members are responsible for in excess of USD2 trillion and are voicing their concerns and comments on the ability of non-US investors to achieve appropriate restitution in the US courts following the NAB vs Morrison ruling on F-cubed (“also known as Foreign-cubed) securities.

The alliance assert that restoring the legislation to pre-Morrison standards “would not transform the United States into the worlds court” as any alleged cases of mis-management, fraud etc would still have a mandatory requirement to prove a “significant US nexus.”

The letter sent to the Secretary of the Securities & Exchange Commission can be viewed here – SEC Foreign Funds letter (18/02/11)

7th March 2011

Since the late 1990s, equities investment has been through significant peaks and troughs. Hyped to unsustainable values in the dotcom boom, the post-millennial stock market crash then wiped billions off portfolio values. Growth throughout the Noughties was followed by a similar radical depression in capital values in 2008 financial markets crisis and its aftermath.

Since that time, equities have recovered strongly, although the total market capitalisation of stock exchanges around the world in early 2011 has yet to regain the peaks of $60+ trillion reached in late 2007. Growth is once again strong, but apparently more sustainable and logically based on solid results rather than unrealistic futures. Institutional investments, which fled into fixed income instruments during the financial markets crisis, are now rebalancing their portfolios back into equities, using the stellar growth of stocks and shares during 2010 to offset at least some of the losses they sustained in the previous couple of years.

Throughout the first decade of the new millennium, earnings from dividend payment have grown. Even taking into account the natural suppression of dividends paid after the financial markets crisis, in line with suppressed profits, the culture of the dividend is far stronger now, compared with the nineties, when returns were often predicated solely on capital growth.

The importance of dividends
Looking historically, a watershed moment arrived in 2003 when Microsoft announced its first ever dividend.  Since then, dividend payouts have steadily increased in popularity until the financial markets crisis.

Then came a natural downturn. Dividend increase announcements were in decline even before the liquidity crisis as companies relied on the greater flexibility of share buybacks to return cash to investors. One commentator¹ has noted that in reality, dividend increases are driven not by excess cash, but instead by a good economic and market environment.

Yet to award dividends solely when times are good creates the least favourable impression on investors. Analysis of dividend reduction during the recent liquidity crisis reveals that investors indiscriminately punished companies cutting dividend during the panic in the second half of 2008 but rewarded dividend reductions in the first half of 2009 as they became comfortable with companies shoring up liquidity buffers in the tough economic and funding environment. Learning from this experience, an increasing number of astute corporates are now starting to use their dividend payments as a proactive tool to manage investor opinion and enthusiasm – in other words, as an investor marketing tool.

Some years ago, research by Dresdner Kleinwort Wasserstein² delivered some key figures that firmly punctured the popular notion that long-term equities gains come from capital growth. The bank’s study told us that: in Europe since 1970, 70% of total equity returns have been derived from dividend yield; and between 1950 – 2000, the average contribution by Europe (excluding UK) of dividend yield to total equity returns has been 62%. The research then goes on to state that the bank sees dividend yield once again becoming the greater proportion of equity returns in the future.

Indicators are now showing a major resurgence in dividend payments as the markets grow strongly. One major index provider in the U.S.³ has reported that across the 7,000+ publicly owned companies whose dividends it tracks, only 35 decreased their dividend payment during the third quarter of 2010 marking a continued, dramatic improvement from the 135 that lowered their dividend payment during the third quarter of 2009. Dividend increases rose 56% during the third quarter to 299 from the 191 recorded during the third quarter of 2009.

Year-to-date, 117 have decreased their dividend payment compared to 730 for the corresponding period last year. 1033 issues have increased their rate so far this year, a 46% gain over the 707 issues that did so last year. The same commentator also reported that, on a dollar-weighted basis, the first nine months of 2010 saw a net gain in annual dividend rates of $18.5 billion compared to a $45.7 billion decline in rates during the comparable period of 2009⁴. This is substantial growth indeed.

Cross-border Investing
Not only are equities back in fashion, but interest in cross-border investing is also on the rise.  According to the statistics from the International Monetary Fund and from global stock exchanges, the market capitalisation of global equities rose 79% between 2001 and 2009, whereas the value of cross border equities investments rose 163% over the same period.

So cross-border shareholdings have risen at something around double the market rate, showing that fund managers have increased the proportion of foreign shares in their portfolio from around 20% in 2001, to more like 28% in 2009. The market capitalisation of the global equities markets (excluding investment funds) is currently around the $55 trillion mark. By comparison, the average proportion of foreign shares in a fund manager’s equities portfolio is in the region of 20-30%.

Fixed-income
The subject of this GOAL study covers cross-border investment in all securities – equities and bonds. The fixed-income market has been very much the beneficiary of the equities market’s crisis of confidence in 2008, with the value of bonds listed on global markets rising from $14 trillion in 2001, to over $63 trillion at the end of 2009 (the latest IMF’s most recent globally reliable measurement point).

Whether growth in issuance will continue, and how strongly, is a moot point. As the equity markets crashed in 2008-9, funds poured into the debt markets.  With the huge and sudden demand, prices on the secondary market soared, and yields on the primary market plummeted. The forward outlook for earnings on gilts is now being debated between various commentators, one of whom noted, “the global savings glut (or investment dearth) has depressed gilt yields. It’s possible that, as these factors weaken, bond yields could rise without jeopardizing equities simply because the bond-earnings yield ratio returns towards normal. Even if ten year gilt yields were to rise to five per cent, this ratio would still be well below its pre-crisis levels.⁵”

Withholding Tax and Reclamation Rates
More companies are now paying a dividend. Those who have historically done so are looking to increase the dividend payout year-on-year. And according to Standard and Poors, this trend is expected to continue strongly through 2011 and beyond.

Holding foreign shares is also becoming more popular with fund managers. The growth in foreign equity holdings between 2001 and 2009 was more than double the growth in global stock markets capitalisation over the same period. This shows that fund managers are increasing the proportion of their portfolio made up by foreign shares.

Bond market activity has increased markedly since the global stock market nadir of 2008.  This increase in debt securities may or may not continue to grow at the same rate in future years, but has introduced a new balance into the fixed-income vs. equities portfolio balance.

At all events, dividends on foreign shares and yield from foreign bonds are subject to withholding tax⁶. This is a tax on earnings that the country’s tax office (the country in which the share or bond is issued) deducts at source, a proportion of which can be reclaimed by the owner of the shares/bonds.

However, GOAL’s research shows that around 25% of that reclaimable tax is left unreclaimed. This amounts to some $16-17 billion of shareholder returns that are being wasted – left unreclaimed in a foreign country’s tax system. This represents a 50% increase in the annual amount wasted compared with 2005 when GOAL last conducted an analysis of the situation.

Pressure on FMs and Custodians
With the increasing popularity of both dividend payments, and cross-border securities, the unreclaimed tax will continue to rise unless fund managers’ service providers – often custodian banks – improve reclamation levels. Increasingly savvy investors, in markets where high yield investments are harder to come by, are putting the fund management community under growing pressure to maximise their investment returns.

As a result of all these factors, dividend yields have become a far more highly scrutinised element of the investor’s portfolio, with consequent pressure on fund managers to devote greater attention to maximise this element of return in the portfolios they are managing.

The significance of unreclaimed withholding tax on cross-border securities holdings has therefore risen to a prominence it has not enjoyed since the ‘nineties and earlier ‘noughties. Back then, however, technology was not available to automatically perform the highly complex task of reclaiming withholding tax, a process which has to incorporate up to date information, formats and procedures from a multiplicity of different legislatures around the globe.

In contrast to the last such period of attention enjoyed by the faithful dividend, technology solutions are now widely available to automate the process of withholding tax reclamation, making it an economic – indeed profitable – process for custodians, and a ‘must have’ for fund managers under pressure from their investor clients.

1. CEB Views, Dividend Trends and Market Reactions, 25 November 2010
2. Dresdner Kleinwort Wasserstein, DrKW launches new Pan-European Income Service Research, Jan 2004
3. Standard and Poor’s, Dividend Record, 4 October 2010
4. ibid
5.Investors Chronicle, Shares shrug off rising gilt yields, 4 Jan 2011
6. See, for instance, definitions at www.goalgroup.com, or at http://www.ubs.com/1/e/ubs_ch/wealth_mgmt_ch/company/c_tax/backtax.html

Stephen Everard

Managing Director

GOAL group

The US saw a long list of class actions filed by angry foreign investors appearing in its courts in 2008, as the financial crisis took hold. Now, three years later, Pension Funds Insider asks how European pension schemes can still pursue such claims, after restrictions have been placed on pursuing non-US firms on American soil.

The US has a legal system in place which allows pension schemes and other investors, who have suffered damages due to corporate misbehaviour or fraud, to claim their money back through the courts. There is a jury who is inclined to pay out large sums of money, lawyers who are paid a contingency fee (a no win, no fee system), and legislation is generally in favour of investors. With a set-up like this, where plaintiffs have very little to lose, why would foreign investors opt to go somewhere else?

Well, the answer is that if the company accused of misbehaving is a non-US one, and has allegedly misbehaved away from the US, then they no longer have to fear an appearance in a US court.

This is due to what was decided one rainy afternoon last year – the day the Supreme Court ruled on Morrison v. National Australia Bank. The case saw foreign investors accusing the National Australia Bank of perpetrating a fraud involving a Florida subsidiary bank. It was claimed that the Florida connection was enough of a link to the US to justify the use of the American legal system. The bank said that the conduct took place in Australia and that the courts had no jurisdiction over the matter. The Supreme Court ruled in favour of the bank.

Ever since, ‘F-cubed’ cases have been denied a trial in the US; existing cases were thrown out and investors excluded from participating in the class actions.

The term ‘F-cubed’ refers to the foreign nature of the claim. The foreign investors, foreign issuers, and the alleged fraudulent conduct taking place in a foreign country.

As Dominic Auld, of counsel at Labaton Sucharow, who specialises in class action litigation, says, Morrison vs. National Australian Bank has affected the right of non-US investors, who bought and sold non-US securities and they bought them on non-US exchange: “This seems straightforward but nowadays many companies are truly multinationals and it is not always clear where the border lies”.

“Essentially the US doesn’t care where companies behave badly,” says Auld. “They only care where investors bought and sold securities. Conduct doesn’t matter anymore, this is the big change.”

So how has this affected all the foreign investors such as European pension funds?

If they bought US securities or bought securities in the US, then they can still go there and make use of the system. In Europe, however, prohibitively high fees have to be paid regardless of the outcome. There is often no jury to appeal to and no real legislation that allows for class action litigations.

“When you are a pension scheme, because of your fiduciary duties it is virtually impossible to risk your pensioners’ money to fund a lawsuit without ensuring you can cover the losses in some way,” says Auld.

“In much of Europe there is downshifting of the costs,” he adds. “In the US we don’t have that, we can never be held responsible for paying the costs of the other party. But in the UK for example that would be why we need the insurance. We can’t have our clients go to court and then basically end up paying a ton of money if the judge decides that he doesn’t like the case. That is not an option for a pension fund, they clearly cannot afford that.”

Stephen Everard, managing director of the Goal Group, a class action lawsuit specialist firm, explains that in the UK, like in other Northern European countries, class action legislation is non-existent. The former UK government, in an attempt to rush through the Financial Services Bill while still in power, left out clause 18-25 – which would have allowed consumers to pursue collective actions against companies that mis-sold to customers.

“Part of the problem for the government would be that if they brought in the legislation they would probably have to exclude the state owned banks,“ says Everard. “Obvious targets for lawsuits are RBS, Lloyds TSB and Halifax – all the banking groups that the public now own.

“So you would be bringing the final bill to the taxpayers, the bill for something they did not want in the first place. The government would have to exclude certain industries or certain institutions – imagine the implications.”

Not a closed case

There may be some hope however. For European class actions that used to be in the US, there has been some effort to try and consolidate the court process through the Netherlands, says Everard.

”The Netherlands have the Act on the Collective Settlement of Mass Claims (Wet Collectieve Afwikkeling Massaschade – WCAM). This Act puts them at the forefront for developments of mass disputes, since it is the only country in Europe with such legislation in place,“ he says.

“In the Netherlands you have the best chance to get a settlement,” agrees Auld. He explains that it is not the same system as in the US but based around it. The Dutch version requires parties to try and settle claims out of court first, which can be made binding by the court when they are agreed upon.

And who needs favourable legislation anyway? Auld believes companies could still be held responsible without such laws in the future. “Slowly you will see change. You’ll see US firms partnering with for example French lawyers, (to) have people on the ground.”

This sort of tie-up could work well with the option of using a ‘third party system’, as found in Australia, to fund lawsuits. Australian lawyers are not allowed to work for a contingency fee so there are third party funding firms who fund litigation. It is the funding companies that actually put out notices of fraudulent activity and then they gather the investors together to determine if they are interested in the case and want to go to court. If they do, then they hire lawyers.

Both Auld and Everard stress that the more cases will be filed outside of the US the more legislation we will see. The uproar over the fact that local pensioners lose their chance of a higher pension will be too important to ignore for politicians in the long run, they predict.

But before we reach that point all have to be onboard. Currently as many as 25 per cent of Northern European pension schemes do not participate in class actions over money that is officially theirs, according to GOAL. The firm reckons that if pension funds do not start taking up more cases then they will lose out on an estimated €1bn.

“I think there is a misconception that it is very difficult, very complex to do,” says Everard.

“True, it isn’t straightforward, there are loads of forms to fill in and lots of calculations to do. But what it comes down to is that if you do not participate you are probably not fulfilling your fiduciary responsibilities. There is money out there that is meant for the underlying pensioners which they are not going to get.”

Northern European pension schemes are losing out by not actively pursuing class actions explains Stephen Everard, GOAL Group.

Class actions have long been prevalent in the US courts. According to Advisen, securities class action suits experienced a surge in the second quarter of 2010, then stabilised in the third quarter. However, class actions are not a phenomenon observed in the US alone. Indeed, there have been historical cases of class actions in France, Italy and Finland in addition to those currently under way in other countries, including Argentina, Australia, Belgium and Israel.

In a nutshell

• Northern European pension schemes are now pursuing class actions over an estimated €450bn lost on their investments in 2008, of which over €60bn originated from their US investments
• however, as many as 25% of these schemes are currently not participating in such class actions, effectively forgoing more than €1bn of recoverable funds
• investors, fund managers and custodians should be proactive in taking part in class actions litigation to recoup their losses, as they are duty bound to act constantly in their beneficiaries’ interests to ensure good corporate governance.

Read the full ‘Get your money back‘ article’ here.

9 January 2011

Un nouveau rapport du groupe GOAL, le spécialiste mondial des services de recours collectifs (aussi appelés « class actions » ou « actions collectives ») estime que, dans les prochaines années, les fonds de pension français vont obtenir une réparation de 216 millions d’euros aux Etats-Unis dans le cadre d’actions collectives portant sur les pertes subies au plus fort de la crise financière en 2008.

La recherche du groupe GOAL a calculé que les fonds de pension d’Europe septentrionale avaient perdu 60 milliards d’euros sur leurs investissements américains en 2008, dont 3,4 milliards d’euros attribuables aux fonds de pension français. De surcroît, le rapport souligne que, en l’absence d’une participation accrue aux class actions, plusieurs fonds de pension français allaient renoncer à des fonds recouvrables de 56 millions d’euros. Il s’agit là d’un avertissement aux fonds de pension qui n’ont pas encore fait valoir leurs droits à l’indemnisation devant les tribunaux américains.

L’ampleur des pertes subies par les fonds de pension nord-européens en 2008 est telle que seule une fraction d’entre elles a été récupérée à ce jour. Bien que certaines plaintes soient résolues dans un délai de deux ans, beaucoup d’entre elles (comme l’a démontré le procès très médiatisé contre Enron Corp.) vont prendre bien plus longtemps. Une étude réalisée par Nera Consulting a indiqué que, fin 2009, plus de 80% des plaintes liées à la crise financière n’avaient pas encore abouti.

GOAL estime que le nombre et le montant des réparations liées au « credit crunch » étaient appelés à augmenter dans les prochaines années. Même si les pressions exercées sur les fonds de pension par la crise économique semblent actuellement s’atténuer, il n’en reste pas moins que les investisseurs institutionnels et  gestionnaires de fonds ont le devoir d’agir immédiatement pour se faire indemniser une partie des importants préjudices qu’ils ont subis au plus fort de la crise financière.

Pour en savoir plus sur le groupe d’entreprises Goal Group ou pour recevoir le rapport complet, veuillez contacter marieb@lindsellmarketing.com

This ruling, which was expected after the decision of the Supreme Court in Morrison v. National Australia Bank Corp., has the effect of eliminating more than 80 percent of the potential damages that could have been awarded following the jury’s verdict against Vivendi in January 2010. Vivendi plans to make a significant reduction in the provisions that it established following the jury’s verdict.

“We are very satisfied with today’s decision”, said Vivendi’s CEO Jean-Bernard Lévy. “It is a substantial victory for Vivendi. Judge Holwell has upheld a position that Vivendi has urged since the beginning of the class action litigation, that claims by shareholders who purchased Vivendi ordinary shares should not be brought before a U.S. court.”

Vivendi will now analyze Judge Holwell’s decision in detail to determine its next steps.

According to the latest research from Stanford Law School and Cornerstone Research, the number of US securities class action filings has fallen slightly compared with the same period last year. Yet does that mean that investors, fund managers and custodians can afford to pay less attention to participating in claims for financial market crisis losses in the US courts? Not at all. A further quick look at the same research report shows that the Disclosure Dollar Loss (the actual amount of money represented by losses covered in these lawsuits) has actually risen year-on-year. Moreover, GOAL Group’s own research has shown that as many as 25 per cent of potential claimants are failing to participate in these class actions, and are therefore leaving their rightful claims on the table.

This non-participation is largely, we believe, caused by a number of false perceptions. First, many think that participation is difficult and complex, despite the fact that the process can now be largely automated through a number of service providers. Secondly, many investors are simply not aware that they have a valid claim. Thirdly, fund managers and custodians may in some cases not be making their clients aware of potential claims. At a time when investment funds large and small, private and commercial, are looking for every way of recovering their capitalisation, failing to participate in US class actions is certainly irresponsible, and may sometimes be negligent. This article reviews the situation for investors in Northern Europe, quantifying the scale of losses, and the cost of non-participation for investors with relevant US equities in their portfolio.

Class actions, where investors can collectively sue to recoup losses suffered as a result of fraudulent corporate behaviour or mismanagement, used to be a phenomenon solely restricted to the US. However, it is worth noting that there have also been historical cases in France, Italy and Finland in addition to current cases in other countries including Argentina, Australia, Belgium and Israel. Since the high-profile corporate governance scandals of the early 2000s such as Enron, class actions in the US courts have been brought to the attention and used by non-US shareholders to seek redress for their losses. While this is encouraging, some major corporate mismanagement cases, occurring around the millennium or before, give an indication of the timescale involved in finalising a class action case. The Enron Victim Trust is only expected to begin distributing to investor victims of the fraud in late December 2010 or early January next year.

Credit Crisis Cases

As these cases reach settlement, the mantle appears to be moving to cases born out of the recent international credit crisis. Those pension funds where equities represented a third or more of their total invested assets experienced colossal losses. In 2008, in Northern Europe, Irish pension funds were exposed to equities at 52 per cent of total assets, followed by the United Kingdom at 46 per cent and the Netherlands at a similarly high rate. Other pension funds, however, such as in Germany and France, benefited from having a larger proportion of their assets invested in bonds. This picture is mirrored in these countries’ exposure to foreign assets, as a percentage of their total assets. Whilst the Netherlands and the United Kingdom both had high exposure, Germany (circa five per cent) remained relatively low.

In 2009/10, it appears pension funds are gradually making a recovery, boosted by sound equity returns. The losses experienced by investors in 2008, however, have been on such a large scale that only a fraction has so far been recouped. The Netherlands and Ireland both reported a five per cent return or less in the period up until June 2009. Clearly, a long road lies ahead for Northern European pension funds and there is an emerging duty of care for institutional investors and fund managers to register and monitor class action claims in order to recoup a proportion of these losses.

Furthermore, according to NERA Economic Consulting, the median settlement in the first Compensat ion Class Funds with the belief that corporate wrongdoing has affected their returns should not shy away from the courts, says Stephen Everard, managing director at GOAL GroupEXCLUSIVE25LegalFocushalf of 2010 was considerably higher than in any prior year. At $11.8 million, the median settlement exceeded 2009’s value of $9 million by almost one-third, crossing the $10 million mark for the first time.

Northern Europe – Claims in the US

Germany

When it comes to applying as lead plaintiff in securities class actions cases, it appears that German asset managers are leading the charge. Commentators have also noted that German investors are keen to pursue losses in the US as it is less costly than taking legal action in Germany. In the US, fees only apply when a case is successful whilst in Germany, the financial risk is far greater with costs having to be laid out before proceedings. This may explain the abundance of cases such as Germany’s Activest Investmentgesellschaft filing to be lead plaintiff in the case against General Motors – having alleged that false and misleading statements were issued to deceive investors as to the company’s financial performance as far back as 2000.

Another high-profile case involves Frankfurtbased Union Investment, having been appointed lead plaintiff in the case against US computer manufacturer Dell. The German fund manager alleges that earning manipulations caused the stock to drop, with reports estimating losses to be around $20 million.

The Netherlands

A similarly high level of participation in US class actions is being experienced in the Netherlands. In July 2009, Dutch industry-wide pension fund Stichting Pensioenfonds Zorg en Welzijn (PfZW) was one of five pension funds (including some Swedish and American) to be granted the privileged status of lead plaintiff in the case against the Bank of America, alleging that key information had been withheld or distorted in relation to its acquisition of Merrill Lynch. Likewise, Dutch Pension Fund and Investment Manager MN Services, which manages around €56 billion for pension funds in the Netherlands, attempted to be represented in the consolidated class action against the Royal Bank of Scotland.

For Dutch pension fund PfZW, represented by PGGM Vermogensbeheer B.V., the national fund for healthcare and the social sector (and the second largest pension fund in Europe), using all available tools to uphold corporate governance is a well established concept. They describe participating in collective litigation in much the same way as German fund managers, as a suitable tool to fulfil “a duty to represent global investors’ interests by striving for adequate loss recovery for all shareholders and essential corporate governance…”.

United Kingdom

In the UK, West Midlands Pension Fund was one of the first funds to point out that participating in shareholder litigation, where appropriate, is key to best practice. As such, they are now one of a growing number of UK funds that have been proactive to ensure they are included in all possible cases, of various sizes, including those against AT&T. Wireless, Cable & Wireless, Federal Home Loan and Royal Ahold NV. Talking to GOAL Group, Tony Doyle, senior investment manager – equities & corporate governance, West Midlands Pension Fund, commented: “The fund supports good governance challenging companies that do not meet best practice, perceiving poor governance as a risk to its longterm financial interests. The Fund therefore submits class actions globally where it believes that it has suffered a financial loss through fraudulent or irresponsible corporate behaviour.”

In March 2009, Merseyside and North Yorkshire pension funds filed a motion to become lead plaintiffs in a US securities class action against Royal Bank of Scotland (RBS). North Yorkshire pension fund had invested as much as £23 million in RBS and said it was keen to participate in the litigation process in order to “safeguard the value of the fund in the long term”. A New York court recently ruled that only US investors would be able to pursue this action, but the UK pension funds involved are currently in discussions to see if the case could be pursued in the UK High Court.

France

40 European pension funds, including funds from France, Netherlands, UK, Germany, Sweden, Norway and other countries filed a suit against Royal Dutch Shell for alleged misreporting of oil reserves and its subsequent financial impact. This was then withdrawn from the US action, to be moved to an EU-located legal action, the first such class action case to be finalised in Europe. The action meant it was possible for Shell to be ordered to pay $450 million by the Amsterdam Court of Appeals in June 2009 to compensate for alleged misstatements over oil and gas reserves.

GOAL Group: Losses and Projected Recoveries, 2008

Northern Europe – Quantifying the Loss

A recent research report from Goal Group quantified the scale of losses suffered by Northern European pension funds, defined as Germany, UK, Ireland, France and the Netherlands – at the heights of the financial markets crisis in 2008, and the amounts likely to be left on the table through non-participation in US securities class action lawsuits. In order to calculate losses, and the sums likely to be left on the table through non-participation, Goal Group combined its historical records of registration and settlement claims, with a variety of other data sources.

The results were stark. Over €450 billion has been lost by Northern European pension funds in 2008. Over €60 billion of these losses were in their US investments. €3.9 billion of this total would be recoverable but with class action participation left at its current rate, over €1 billion is likely to be left on the table and distributed amongst only those who successfully filed a claim.

The Netherlands, the United Kingdom and Ireland (taking into account its smaller GDP) were found to be the countries with highest proportion of their investments in the US – and all with high equity exposure, resulting in large losses in these investments – €28 billion, €26 billion and €2.4 billion respectively. The amount invested in U.S. markets by Germany and France, however, was decidedly smaller, resulting in comparatively fewer losses by German funds of €485 million and French funds of €3.4 billion.

Based on historical trends, €1.8 billion is expected to be recovered by Dutch pension funds through class action participation, €1.7 billion by those in the U.K. and €156 million by those in Ireland. Due to Germany and France having fewer investments (and therefore losses) in the US, German pension funds are set to recover €31 million and French funds €216 million.

The focal point of these findings, however, is that a significant proportion of these funds will remain unclaimed, with a percentage of investors not participating in available class action cases. The Netherlands is expected to leave a vast €466 million worth of funds on the table, followed by the UK at €436 million, France at €56 million, Ireland at €40 million and Germany at €8 million.

As our research demonstrates, over €1 billion is likely to be left on the table by Northern European investors, highlighting the urgent need (and indeed, legal obligation) for institutional investors to make claims on behalf of their clients where a class action is involved. And since there are now low-cost specialist services which are already enabling many financial organisations to do so, there remains no excuse for ignoring their fiduciary duty to shareholders.

AST

The value of investments, as we all know, can go down as well as up. Some you win, some you lose. But if you lose as a result of fraud or mismanagement there is, in some jurisdictions, the option of redress through securities class action litigation.

But while any investor is entitled to money if a court rules in the plaintiffs’ favour, investors will only get it if they put in a claim before the period during which claims can be made expires. The trouble is, only about 75 per cent of eligible pension funds do this, according to a new study from global class action specialist GOAL Group.

Pension funds in northern Europe lost more than €450 billion in the financial crash of 2008, including €60 billion in US investments. GOAL Group calculates that about €3.9 billion of this is recoverable, but unless current levels of participation in US securities class actions increases, €1 billion will be left unclaimed, including €436 million due to UK funds, €466 million to those in the Netherlands, €56 million in France, €40 million in Ireland and €8 million in Germany. It’s good news for investors that claim, as unclaimed money will usually be divided between them, but very bad news for the others.

There are various reasons why some European pension funds may not be claiming. There is a perception that the time and expense involved outweighs potential gains, typically about 12 per cent of the registered loss. While many cases do take years to resolve (Enron, for example, has kept armies of lawyers occupied for a decade), this does not have to be a problem for the pension funds. A number of service providers, including GOAL, offer outsourced services that identify, then manage and process class action claims on funds’ behalf, mostly on a no win/no fee basis.

Even so, some funds’ trustees and managers may not have time to consider this option. “We’ve been dealing with local authority pension schemes who recognise that this is something they should do, but there’s always something else on top of the pile,” says Stephen Everard, managing director at the GOAL Group. “Some funds we’ve been speaking to for two and a half or three years.

“In some cases there are objections on moral grounds: why should I get involved with suing a company in which I am a shareholder?” Everard continues. “But if you come in at the settlement stage the litigation is done and you’re just coming in when money is distributed. And if you don’t, someone else will take it.” He cites a recent case in which two GOAL clients received payouts much higher than the customary 12 per cent: 55 per cent and 35 per cent respectively, for this reason.

Everard also comes across fund managers convinced that they had nothing to gain from participation in class action. “I spoke to a manager a few weeks ago who was adamant there was nothing he was missing – and when we had a look we found that 23 per cent of the portfolio could have had a claim next to it,” says Everard.

According to the GOAL study the Netherlands, the UK and Ireland were the three European countries where pension funds had the highest proportion of US investments in 2008, suffering losses of €28 billion, €26 billion and €2.4 billion. French funds lost €3.4 billion, while a lower exposure to equities meant smaller losses for German funds, of €485 million.

Despite their place near the bottom of the list, German funds, particularly where administered by larger custody service providers, have been active in this area for many years. In the Netherlands, Stichting Pensioenfonds Zorg en Welzijn (PfZW) was one of five pension funds from across the globe that acted as lead plaintiff in a case against Bank of America that began in 2009 and was related to the bank’s management of information during its acquisition of Merrill Lynch. The Dutch pension fund MN Services is an active participant in class action against the Royal Bank of Scotland (RBS) that alleges misconduct in relation to the bank’s exposure to toxic assets and also to its acquisition of ABN Amro.

In the UK, the West Midlands Pension Fund has participated for some years in shareholder litigation, recovering more than $900,000. In March 2009 the Merseyside and North Yorkshire pension funds filed a motion to become lead plaintiffs in a class action against RBS. A New York court has since ruled that only US investors can pursue this action, so the funds are currently considering whether or not the case could be pursued in the British High Court.

Also in the UK, Lothian Pension Fund and the Northern Ireland Local Government Officer Superannuation Committee (NILGOSC) were co-lead plaintiffs in an action begun in August 2008 against Lehman Brothers over the use of mortgage-backed securities. And 40 pension funds, including some based in Germany, the Netherlands, the UK, Sweden and Norway, withdrew from a US action against Royal Dutch Shell to begin an EU-located action instead. This became the first of its kind to be concluded in a European jurisdiction, with Shell ordered by the Amsterdam Court of Appeals in June 2009 to pay $450 million in compensation for alleged misstatements concerning oil and gas reserves.

“A number of UK funds are extremely interested in getting involved in securities litigation with BP, following the Gulf disaster,” says Beata Gocyk-Farber, partner at US law firm Bernstein Litowitz Berger & Grossmann (BLBG). But, following a US Supreme Court ruling in June 2010 which limits the rights to litigate in the US of investors whose shares were purchased from non US stock exchanges, those UK pension funds that bought BP securities on the London Stock Exchange have been told they cannot litigate against BP. They are currently considering their options.

Among significant cases in the settlement process are a lawsuit against Countrywide Financial that may be worth $600 million; as well as a long-running case involving New Century worth $124 million and a case involving AIG where as much as $1 billion is at stake.

But there is another reason why pension funds may not get involved with securities class actions: the unwillingness of custodians to do the dirty work on their behalf. A US lawyer elaborates, off the record: “The [scheme trustees] believed filling out the forms to get the money from settlements was the job of the custodian. The custodians thought that was not their job. It was only as a result of being dragged into it by large American pension schemes that custodians started to do it. If you’re a pension scheme and you want to make sure you’re getting the money you’re entitled to, you’ve got to make it clear to the custodian.”

Of course, lawyers are more than happy to help pension schemes to do this. But would it be fair to be suspicious of lawyers with a vested interest in drumming up business?

“The lawyers have been accused of ambulance chasing,” confirms Stephen Everard. “But there are extremely reputable firms in the US who we deal with who won’t just fire off so many cases and hope some of it sticks. There are others who do operate in that manner. That certainly wouldn’t be a valid criticism of companies like ours, because we only get involved once the settlement is over.”

Beata Gocyk-Farber believes that working on a no win/no fee basis is a strong motive for lawyers to be disciplined. “We have an interest in bringing the litigation, but we take a risk in bringing it because we fund the entire cost,” she says. “That could be several million dollars. So we have an interest in cases that we consider meritorious. We are very selective.”

If the case is won, the lawyer’s cut might be as low as five per cent but could rise to 15 or 20 per cent, says Gocyk-Farber. “But usually,” she adds, “the fund can negotiate.”

At present those negotiations are overwhelmingly likely to concern US litigation. But Stephen Everard believes growing demand in Europe and the US Supreme Court’s ruling on foreign investors may force other jurisdictions to introduce class action legislation. Such measures were included in the Financial Services Bill scrapped by the Labour government in the UK just before the May 2010 General Election. “But when you think about it,” Everard adds, “in the UK, the first targets for anything like this would be the banks, which are now all publicly owned.”

Nonetheless, say those who advocate class action, if there’s somewhere trustees can sue, they should. They’re not doing it for themselves, after all. “Trustees have a fiduciary duty to maximise all sources of income for their schemes, which includes obtaining their fair share of settlement proceeds in any class actions,” says Thomas Dubbs, partner at US law firm Labaton Sucharow.

“There is often suspicion that because this involves litigation in America, which many Europeans find distasteful, there must be some catch,” he continues. “That is the wrong approach. The proper approach is to start from the assumption that you have a fiduciary duty to maximise returns for your scheme.”

Or, as Everard puts it: “There’s no good reason not to do it. If you don’t, you’re failing in your fiduciary duty.”

Dutch and UK pension funds ravaged by losses now seeking class action to recover investments

Northern European pension funds are set to try to recuperate €3.9 billion in class action law suits connected to losses suffered at the peak of the financial markets crisis in 2008, according to a new report.

The funds from Germany, the UK, Ireland, France and the Netherlands have lost over €450 billion on their investments in 2008. Over €60 billion of these losses originated from their US investments, says the report from GOAL Group, the leading global class action services specialist.

Dutch pension funds suffered the most colossal losses of €28 billion, followed closely by the UK pension funds at €26 billion, considerably ahead of the losses seen in France, Ireland and Germany at €3.4 billion, €2.4 billion and €485 million respectively.

The report also highlights that if class action participation rates do not improve, a number of Northern European pension funds will effectively forego their right to recoup in total approximately €1 billion of recoverable funds. This is a wake-up call to pension funds that are currently missing out on their legal right to claim damages through the US courts.

If investors and fund managers are to recoup a proportion of their losses through class action litigation, either in US or European courts, now is the time to become actively involved in the filing and participation process, the report added.

The losses experienced by Northern European pension funds in 2008 have been on such a large scale that only a fraction has so far been recouped. Whilst some cases are resolved within two years of being filed, many, as effectively demonstrated by the high profile case against Enron, will take several years before reaching resolution or settlement.

A study by Nera Consulting showed that at the end of 2009, over four fifths of filings related to the financial markets crisis were still unresolved. For cases filed in 2008 and 2009, median investor losses rose by two fifths compared to previous years, to over $500 million.

Securities class actions experienced a surge in the second quarter of 2010, with the annual number of filings set to be more than experienced in 2008, yet fewer than in 2009.

However, total settlement amounts in the first half of 2010 fell in comparison to 2009 levels. Once these credit crunch related cases come to resolution, the number and the size of settlements are likely to increase, as quantified by GOAL’s research.

Whilst pressure exerted on pension funds by the economic downturn appears to be easing, there is nevertheless a pressing duty of care for institutional investors and fund managers to act now if they are to recoup significant losses suffered at the peak of the financial markets crisis.

The recent abundance of high profile cases in the UK and throughout Northern Europe has helped raise awareness of the opportunities to claim. In March 2009, Merseyside and North Yorkshire pension funds filed a motion to become lead plaintiffs in a US securities class action against Royal Bank of Scotland.  Similarly, Avon Pension Fund, was granted lead plaintiff status in a case against UK listed GlaxoSmithKline, Other examples include Lothian Pension Fund and the Northern Ireland Local Government Officer Superannuation Committee (NILGOSC) which were both granted co-lead plaintiff status in August 2008 against Lehman Bros over their mortgage backed securities.

‘Our research shows that aside from employing class actions to fulfil corporate governance responsibilities, there is a growing need for pension funds within the Northern European region to plug the escalating pensions gap, particularly as a result of losses suffered during the financial markets crisis,’ said Stephen Everard, Managing Director, GOAL Group.

‘As credit crisis borne cases continue to be brought through 2010, filings are likely to give way to Ponzi scheme allegation cases and standard securities actions. Fund managers should therefore be proactively filing and participating in class actions now, if they are to be included in what are likely to be the most sizeable settlements over the next three to five years, those emerging from the economic crisis,’ he added.

BA wins class action lawsuit against UK flower companies

British Airways recently faced legal action from two UK flower importers allocating that the company was involved in price-fixing cartel. The flower importers believed that their loss in revenue was due to the unmerited price of air cargo imposed by the airline.

After being brought to High Court, the airline has won the lawsuit thus preventing further onset of air cargo customer complaints and class action lawsuits. The lawsuit was supported by more than 200 other companies which claimed they had also suffered loss as a result of the cartel. These claims must now be brought individually to the Court of Appeal.

Cartels are a formal agreement among competing firms to fix prices on similar products such as airline tickets or gas prices. The companies not only agree on the price of the item but the industry output, market shares, and allocation of customers and/or territories. The objective is for companies to increase their profits by eliminating competitors not involved in the cartel.

Class action lawsuits associated with price-fixing cartels are not new to British Airways. In 2007, BA pleaded guilty to being involved in a US cartel scam. The airline was fined $300m for its role in conspiring to fix cargo rates and passenger fares. And, in the beginning of November 2010 the airline was charged with another fine from the European Commission for their involvement in a European air cargo cartel that lasted nearly six years.

The UK flower importers are still planning to press ahead with areas of the claim that were unresolved or left out of the recent ruling. They believe that being independently represented in the Court of Appeals will simplify the process while saving time and money.

At the peak of the economic crisis in 2008, Northern European pension schemes lost a total of €450 billion of their portfolio value, of which €60 billion (£51 billion) was in their US investments. One third, €27.4 (£21billion) were attributed to UK pension funds. Within the Northern European territory, around 7% of those losses (€3.9 billion, of which the UK amounts to €1.7 billion) is expected to be recouped through class action litigations over the next few years.  However, a proportion of pension schemes are missing out on the opportunity to participate and are leaving a significant amount of €1 billion unclaimed on the table – in the U.K. €436 million (£368 million).  These are the results of GOAL Group research, completed in 2010, and drawing on a wide range of proprietary and third party data sources.

The research aims to measure the scale of losses Northern European pension funds incurred during the heights of the financial crisis in 2008 as well as the sums likely to be left unclaimed through non-participation in U.S. securities class action lawsuits by countries such as Germany, U.K., Ireland, France and the Netherlands. The results show that a significant portion will remain unclaimed. Netherlands pension funds are expected to miss out on €466 million, followed by the U.K. at €436 million, France at €56 million, Ireland at €40 million and Germany at €8 million unclaimed.

According to a study conducted by Stanford Law School and Cornerstone Research, the number of U.S. securities class action filings has fallen slightly compared with the same period last year. However, fund managers and custodians are paying attention to participation opportunities in claims for financial market crisis losses in the U.S. The report states that the actual amount of money represented by losses covered in these lawsuits has risen on a year-by-year basis.

In the past, class actions used to be a legal practice restricted to the U.S. However, this opportunity for investors to collectively sue to recoup losses suffered as a result of fraudulent corporate behaviour or mismanagement is now creeping beyond U.S. borders: France, Italy, and Finland have dealt with class action cases in the past, while Argentina, Australia, Belgium and Israel are currently doing so.

Encouraging investors to take action

While older cases reach settlements, the present focus appears to be moving to cases born out of the recent international credit crisis. Enron, one of the high-profile U.S. corporate governance scandals that came in full swing in early 2000, encouraged non-US stakeholders to fight for the redemption of losses incurred. However, the extensive timescale to finalise class action cases can become off-putting: the Enron Victim Trust is expected to start distributing to investor victims of the fraud this month or early next year.

The cause for a relatively high non-participation rate (around 25%) is for the most part due to false perceptions. First of all, many investors are not aware that they have a valid claim. This can be tied to the second possibility, that some fund managers and custodians may not be making their clients aware of potential claims. Thirdly, the perception that filing a case is far too complex and difficult to manage persists, although the process can be largely automated through a number of service providers. Investment funds have incurred large losses during the economic downturn and their eagerness to find ways to recover these losses should encourage them to take advantage of this accessible opportunity to participate in U.S. class actions.

Nevertheless, which pension funds were the most affected? Those who invested a third or more of their assets into equities are those experiencing the greatest distress. Ireland and the United Kingdom were the most severely hit, with 52% and 46% respectively of total assets invested in equities. The Netherlands suffered at a similar rate. However, pension funds in Germany and France had larger proportions of their assets invested in bonds, incurring less damaging losses. Moreover, Germany’s minor exposure to foreign assets (about 5%) kept losses to a minimum.

Losses in 2008 have been on such a large scale, that only a small fraction has been recovered: The Netherlands and Ireland regained 5% up until the middle of 2009. 2009 and 2010 show a more promising development as pension funds are making gradual recovery, with sound equity returns. However, there is growing responsibility for institutional investors and fund managers to register and monitor class action claims in order to recoup a portion of their losses.

Northern Europe: Claims in the U.S. versus claims at home

The prospect for class actions in the U.S. is well-established; however investors need to be proactive to ensure they are included in cases over the coming years. Class actions are beginning to make headway in local legislatures throughout Northern Europe, with the Netherlands currently taking the lead and several Northern European investors are already participating in U.S shareholder litigation in order to support good governance and challenge those companies that do not meet best practice.

The Netherlands

Claims in the U.S: The Netherlands has a high level of participation in U.S. class actions. Last year, the Dutch industry-wide pension fund Stichting Pensioenfonds Zorg en Welzijn (PjZW) was one of five international pension funds granted the privileged status of lead plaintiff in the case against Bank of America. It was alleged that key information had been withheld or distorted in relation to its acquisition of Merrill Lynch. A similar case was conducted by the Dutch Pension Fund and Investment Manager MN Services, who manage around €56 billion for pension funds in the Netherlands and attempted to represent in the consolidated class action against the Royal Bank of Scotland.

Claims at home: The case against Royal Dutch/ Shell Group was the first class action to be finalised within Europe, originally established in the U.S., it was moved to the Netherlands. In 2005 the Dutch Act on the Collective Settlement of Mass Claims authorized the Amsterdam Court of Appeals to enforce Shell to pay $450 million in 2009. It involved the compensation for misstatements between 1997 and 2003 regarding oil and gas reserves. This Act puts the Netherlands at the forefront for developments of mass disputes, since it is the only country in Europe with such legislation in place. It does not work like the U.S. model, although it is based around it – the Dutch version requires parties to try to settle claims out of court first, which can be made binding by the court.

Germany

Claims in the U.S: Claiming in the U.S. is particularly attractive to German investors, since the costs of taking legal actions are far less in the U.S. than in Germany. In the U.S., fees only apply when a case is successful whilst in Germany the costs have to be laid out before proceedings. Hence there is an array of cases filing to be lead plaintiff, for instance Germany’s Activest Investmentgesellschaft against General Motors. It was alleged that forged and misleading statements were issued to deceive investors as to GM’s financial performance going back to 2000. Frankfurt-based Union Investment was appointed lead plaintiff in the case against U.S. computer manufacturer DELL. The German fund alleges that earning manipulations caused the stock to drop, with reports estimating losses around $20 million.

Claims at home: Germany is also becoming a forerunner for collective litigations at home. Germany’s largest investor lawsuit, the Deutsche Telecom case – in which investors claim they were tricked by misleading or omitted prospectus information issued in 1999 and 2000, overstating the value of its real property by €2 billion – enacted the Capital Markets Model Act in 2005. Depending on the verdict expected this month, the five-year test case may be implemented into the German Civil Procedural Code. If passed, it may lead to many comparable class action cases, as well as to the instalment of a permanent collective litigation procedure in Germany.

United Kingdom

Claims in the U.S: The West Midlands Pension Fund is one of a growing number of U.K.-based funds that has been proactively ensuring to be included in all possible cases of all sizes, among others, cases against A.T.&T. Wireless, Cable & Wireless and Federal Home Loan. In March of last year, Merseyside and North Yorkshire pension funds filed a motion to become lead plaintiffs in a U.S. securities class action against RBS. A court in New York ruled that only U.S. investors would be entitled to pursue this action; however, the U.K. pension fund is currently in discussions to have the case passed on to the U.K. High Court.

Claims at home: The U.K. Civil Justice Council recognised in a recent report the “unmet need” for better compensation for potential financial services litigants. This is due to the fact that the U.K. has group litigation orders and representative claims, but no U.S.-style class actions procedure that ensures the finality of claims in place. The latest Financial Services Bill draft included clauses to allow class actions against financial institutions. However, these clauses were eliminated before being passed into law as part of a move to get the Bill enacted before the Parliament was dissolved in April 2010. The Financial Reform Act of May 2010 does not mention class actions but they are expected to reappear on the governmental agenda.

France

Claims in the U.S:  France is among the 40 European pension funds which has filed a law suit against the for the aforementioned Royal Dutch Shell.

Claims at home: Despite multiple debates on this issue, France has no working group litigation or class action procedure in place. French investors are ensuring that class actions remain on the French court’s agenda, but the legal landscape is not yet ready to put a collective litigation into action.

Ireland

The Irish law doesn’t allow for class actions but for restricted and rarely used test cases and representative actions. An independent statutory body that reviews the law and promotes reforms, the Irish Law Reform Commission, proposed the inclusion of class action procedures in 2005. However, the Minister of Justice disapproved of the recommendation, making it unlikely that any such laws will be passed into legislation in the near future.

Conclusion

North European pension funds have experienced severe losses, and although a certain level of recovery took place in 2009, pension funds still have a long way to go. Our research shows that over €1 billion is likely to be left on the table by Northern European investors relevant to cases referring to incidents in 2008, but only now coming to court in the US.  This reinforces the need and legal responsibility for funds to take action on behalf of their beneficiaries. As class action filings come to resolution over the next decade, we can expect to see higher average settlement amounts to match. Yet too many fund managers and institutional investors are not taking class actions into consideration, nor actively monitoring or filing claims.

Now is the time for investors and fund managers to become actively involved in the filing and participation process to recoup a proportion of their losses through class action litigation, either in US or European courts. However, keeping track of the opportunities to make a claim and the processes required to do so successfully, can be a complicated and daunting task – with many investors mistakenly be­lieving that the cost and time involved will outweigh the benefits. In fact, specialist services are now available to handle the class action participation process, often on a no-win, no-fee basis.

Company profile

The Goal Group of Companies was incorporated on 1 November 1989 and is widely-acknowledged in the financial services sector for its innovative and creative solutions to highly-specialised niche processes.

Goal Group,  ISO 9001:2008 accredited, has a truly global, blue-chip client base including several of the world’s largest global custodians, asset managers, private banks, pension funds, local government agencies, hedge funds, high net-worth individuals, investment banks, prime brokers and fund managers spread widely across Europe, Asia and the United States.

Goal Group’s class actions service is provided via its wholly-owned subsidiary Goal Global Recoveries Limited (‘GGRL’) and supports investors and corporate entities who have suffered financial loss from owning shares in a company where there has been proven mis-management and/or unlawful behaviour.

Goal Group’s withholding tax solutions include GTRS, GQI, GOAL TaxBack and GDMS.  Research by Goal has shown that in excess of USD 10 billion of withholding tax remains unclaimed each year by the rightful owners and beneficiaries.  Goal’s solutions facilitate the reclamation of circa USD 11 billion per annum and assist its clients to benefit from relief at source wherever practicable and possible to do so.

For further information about the Goal Group of Companies, please visit www.goalgroup.com

Stephen Everard
Managing Director
Goal Group Ltd.

A number of UK pension schemes are set to miss out on the opportunity to recover £368m through US securities class action, a report has claimed.

The Goal Group – a class action service provider – estimated that if current UK schemes’ participation rates to class actions do not improve, some UK schemes will not benefit from their right to offset part of their losses suffered on US investments in 2008.

Out of the £51bn lost by Northern European pension funds, around £21bn is thought to be attributable to UK schemes.

The firm said over the next few years £1.4bn will be recouped by UK funds participating in US collective lawsuits. And more class actions could be launched in the next months.

Stephen Everard, managing director of the Goal Group, said: “As credit crisis borne cases continue to be brought through 2010, filings are likely to give way to Ponzi scheme allegation cases and standard securities actions.

“Fund managers should therefore be proactively filing and participating in class actions now, if they are to be included in what are likely to be the most sizeable settlements over the next three to five years – those emerging from the economic crisis.”

However, some UK schemes have some reservations on US class actions.

Speaking at the National Association of Pension Funds annual conference at the beginning of the month, Philip Read, chairman of British Coal Staff Superannuation Scheme, described class actions as “ethically wrong”.

And other schemes’ representatives agreed with him that while class actions allow schemes to get money which will ultimately benefit their members, they are also likely to cause a drop in share value detrimental to schemes’ finance.

In the last years some high-profile cases involving UK schemes have raised awareness of the opportunities for UK players to seek redress in the US.

In March 2009, Merseyside and North Yorkshire pension funds filed a motion to become lead plaintiffs in a US securities class action against Royal Bank of Scotland (RBS).

Other examples include Lothian Pension Fund and the Northern Ireland Local Government Officer Superannuation Committee (NILGOSC), which were both granted co-lead plaintiff status in August 2008 against Lehman Brothers over their mortgage-backed securities.

However, a recent US Supreme Court decision is likely to make it more difficult for non-US schemes to be included in US class actions in the future.

The June ruling in Morrison v National Australia Bank established that claims brought in the US courts by foreign investors who purchased securities in foreign companies on foreign exchanges (known as F-cubed actions) would not be allowed to proceed.

A report from Goal group claims £1.4 billion will be recouped from  by UK pension funds participating in US class actions connected to losses suffered during the recession.

UK pension funds collectively lost £21 billion on their US investments in 2008 according to the class action specialists.

However, if class action participation does not improve UK schemes will effectively forgo their right to recoup some £368m of recoverable funds.

Stephen Everard, managing director of Goal Group, said participating in class actions could assist schemes that are struggling to cut their deficits .

“Fund managers should be filing and participating in class actions now if they are to be included in what are likely to be the most sizeable settlements  over the next three to five years emerging from the economic crisis.”

So rechnet die Goal Group damit, dass sich sowohl die Zahl als auch der Umfang der Einigungen erhöhen wird. „Während der Druck, der durch den Konjunkturabschwung auf die Pensionsfonds ausgeübt wurde, scheinbar abnimmt, herrscht bei institutionellen Investoren und Fondmanagern dennoch die drückende Sorgfaltspflicht, jetzt handeln zu müssen“, schreiben die Analysten. Nur dann könnten ihnen die erheblichen Verluste, die sie auf dem Höhepunkt der Finanzmarktkrise erlitten haben, erstattet werden.

Dass deutsche Investoren sehr gewillt seien, Verluste in den USA einzuklagen, führen die Experten der Goal Group auch darauf zurück, dass es in den USA kostengünstiger sei als in Deutschland, gerichtliche Schritte einzuleiten. In den USA würden nur dann Gebühren fällig, wenn eine Klage erfolgreich ist, während in Deutschland das finanzielle Risiko ein weitaus größeres sei, da die Kosten schon vor den Verhandlungen ausgelegt werden müssen. Das, so die Goal Group, erkläre die Unmenge an Klagen, so wie die der deutschen Activest Investmentgesellschaft, die Hauptklägerin im Prozess gegen General Motors sein will. Die Gesellschaft hat erklärt, dass Falschaussagen gemacht wurden, um Investoren über die finanzielle Lage des Unternehmens zu täuschen. Ein weiterer Fall betrifft die in Frankfurt ansässige Union Investment, die laut Goal Group als Hauptklägerin im Prozess gegen den US-amerikanischen Computerhersteller Dell fungiert.

Stephen Everard, Geschäftsführer der Goal Group, betont: “Sammelklagen müssen schon deswegen eingereicht werden, um Verpflichtungen im Rahmen der Corporate Governance nachzukommen.“ Während im Jahr 2010 weiterhin hauptsächlich Fälle, die durch die Kreditkrise ausgelöst wurden, vor Gericht gebracht werden, würden in Zukunft wohl Beschuldigungen zu Schneeballsystemen und Standardwertpapierprozesse die Mehrheit darstellen. Fondsmanager sollten deshalb jetzt Klagen einreichen und sich an Sammelklagen beteiligen, wenn sie noch an den wohl umfangreichsten Entschädigungen der nächsten Jahre teilhaben wollen, rät Everard.

A new report from GOAL Group, the leading global class action services specialist, shows that over the next few years, £1.4 billion will be recouped by UK pension funds participating in US class action lawsuits connected to losses suffered at the peak of the financial markets crisis in 2008. GOAL Group’s findings identify that Northern European pension funds have lost £51 billion on their US investments in 2008, some £21 billion of which is attributable to UK pension funds. Furthermore, the report also highlights that if class action participation rates do not improve, a number of UK pension funds will effectively forego their right to recoup some £368 million of recoverable funds. This is a wake-up call to pension funds that are currently missing out on their legal right to claim damages through the US courts.

The losses experienced by Northern European pension funds in 2008 have been on such a large scale that only a fraction has so-far been recouped. Whilst some cases are resolved within two years of being filed, many, as effectively demonstrated by the high-profile case against Enron Corp., will take several years before reaching resolution or settlement. A study by Nera Consulting showed that at the end of 2009, over four fifths of filings related to the financial markets crisis were still unresolved.  Furthermore, for cases filed in 2008 and 2009, median investor losses rose by two fifths compared to previous years – to over $500 million[1]. Securities class action experienced a surge in Q2 2010, with the annual number of filings set to be more than experienced in 2008, yet fewer than in 2009[2]. However, total settlement amounts in the first half of 2010 fell in comparison to 2009 levels. Once these credit crunch related cases come to resolution, the number and the size of settlements are likely to increase, as quantified by GOAL’s research. Whilst pressure exerted on pension funds by the economic downturn appears to be easing, there is nevertheless a pressing duty of care for institutional investors and fund managers to act now if they are to recoup significant losses suffered at the peak of the financial markets crisis.

The recent abundance of high-profile cases in the UK and throughout Northern Europe has helped raise awareness of the opportunities to claim. In March 2009, Merseyside and North Yorkshire pension funds filed a motion to become lead plaintiffs in a U.S. securities class action against Royal Bank of Scotland (RBS).  Similarly, Avon Pension Fund, was granted lead plaintiff status in a case against UK-listed GlaxoSmithKline, Other examples include Lothian Pension Fund and the Northern Ireland Local Government Officer Superannuation Committee (NILGOSC) which were both granted co-lead plaintiff status in August 2008 against Lehman Bros over their mortgage-backed securities.

If investors and fund managers are to recoup a proportion of their losses through class action litigation, either in US or European courts, now is the time to become actively involved in the filing and participation process.  However, keeping track of the opportunities to make a claim and the processes required to do so successfully, can be a complicated and daunting task – with many investors mistakenly be­lieving that the cost and time involved will outweigh the benefits. In fact, specialist services are now available to handle the class action participation process, often on a no-win, no-fee basis.

Tony Doyle, Senior Investment Manager- Equities & Corporate Governance, West Midlands Pension Fund, comments, “We have been involved in numerous class actions over the years, varying in size, including A.T. & T. Wireless, Cable & Wireless, Federal Home Loan and Royal Ahold NV. We have recovered over $ 900,000 to date. The Fund has always supported good governance, challenging companies that do not meet best practice. We perceive poor governance as a risk to a fund’s long-term financial interests. The Fund therefore submits class actions globally where it believes that it has suffered a financial loss through fraudulent or irresponsible corporate behaviour. “

Stephen Everard, Managing Director, GOAL Group, comments, “Our research shows that aside from employing class actions to fulfil corporate governance responsibilities, there is a growing need for UK pension funds to plug the escalating pensions gap, particularly as a result of losses suffered during the financial markets crisis. As credit crisis borne cases continue to be brought through 2010, filings are likely to give way to Ponzi scheme allegation cases and standard securities actions. Fund managers should therefore be proactively filing and participating in class actions now, if they are to be included in what are likely to be the most sizeable settlements over the next 3 to 5 years, those emerging from the economic crisis.”

Table 1

Methodology

Publicly available data sources on class action settlements were combined with GOAL Group’s own proprietary datasets in order to quantify the levels of loss suffered by Northern European (Netherlands, UK, France, Ireland, Germany) pension funds and in order to forecast how much is likely to be recouped through US securities class actions as a result of losses in 2008.

“This is a wake-up call to pension funds that are currently missing out on their legal right to claim damages through the US courts,” it said.

West Midlands Pension Fund senior investment manager – equities & corporate governance Tony Doyle said the local authority fund had recovered $900,000 (£567,000) in class actions to date.

He added: “The fund has always supported good governance, challenging companies that do not meet best practice. We perceive poor governance as a risk to a fund’s long-term financial interests.

“The fund therefore submits class actions globally where it believes that it has suffered a financial loss through fraudulent or irresponsible corporate behaviour.”

GOAL said a number of schemes – primarily members of the LGPS – had pursued cases against large firms.

In March 2009, the Merseyside and North Yorkshire pension funds filed a motion to become lead plaintiffs in a US securities class action against Royal Bank of Scotland.

Similarly, the Avon Pension Fund was granted lead plaintiff status in a case against UK-listed GlaxoSmithKline.

Other examples included the Lothian Pension Fund and the Northern Ireland Local Government Officer Superannuation Committee (NILGOSC), which were both granted co-lead plaintiff status in August 2008 against Lehman Bros over their mortgage-backed securities.

Research conducted by GOAL Group found North European pension funds lost £51bn on their US investments in 2008 – some £21bn of which was attributable to UK schemes.

However, the global class action services provider warned schemes risk missing out on £368m of recoverable funds by failing to participate in class actions.

“This is a wake-up call to pension funds that are currently missing out on their legal right to claim damages through the US courts,” it said.

West Midlands Pension Fund senior investment manager – equities & corporate governance Tony Doyle said the local authority fund had recovered $900,000 (£567,000) in class actions to date.

He added: “The fund has always supported good governance, challenging companies that do not meet best practice. We perceive poor governance as a risk to a fund’s long-term financial interests.

“The fund therefore submits class actions globally where it believes that it has suffered a financial loss through fraudulent or irresponsible corporate behaviour.”

GOAL said a number of schemes – primarily members of the LGPS – had pursued cases against large firms.

In March 2009, the Merseyside and North Yorkshire pension funds filed a motion to become lead plaintiffs in a US securities class action against Royal Bank of Scotland.

Similarly, the Avon Pension Fund was granted lead plaintiff status in a case against UK-listed GlaxoSmithKline.

Other examples included the Lothian Pension Fund and the Northern Ireland Local Government Officer Superannuation Committee (NILGOSC), which were both granted co-lead plaintiff status in August 2008 against Lehman Bros over their mortgage-backed securities.

UK pension funds are expected to recoup GBP1.4 billion in class action lawsuits in the US after losses suffered during the financial crisis, it has been revealed. The study, by the GOAL Group, reported that pension funds in North Europe lost a total of GBP51 billion on their US investments in 2008, of which GBP21 billion was attributable to UK pension schemes.

GOAL has called for pension schemes to ensure they don’t lose out on GBP368 million of recoverable funds if they don’t take part in the class actions. It commented “This is a wake-up call to pension funds that are currently missing out on their legal right to claim damages through the US courts.”

Pension schemes such as the West Midlands Pension Fund have so far been able to recover some monies owed, with the local authority fund receiving GBP567,000 in class actions to date. Tony Doyle, the authority’s senior investment manager, equities &corporate governance , said “We perceive poor governance as a risk to a fund’s long-term financial interests. The fund therefore submits class actions globally where it believes that it has suffered a financial loss through fraudulent or irresponsible corporate behaviour.”

Also, in March last year, the Merseyside and North Yorkshire pension funds filed a motion to be lead plaintiffs in a securities class action in the US against the Royal Bank of Scotland , while the Avon Pension Fund was also granted status of lead plaintiff in a case against GlaxoSmithKline .

GOAL Group’s findings identify that Northern European pension funds have lost £51 billion on their US investments in 2008, some £21 billion of which is attributable to UK pension funds. Furthermore, the report also highlights that if class action participation rates do not improve, a number of UK pension funds will effectively forego their right to recoup some £368 million of recoverable funds. This is a wake-up call to pension funds that are currently missing out on their legal right to claim damages through the US courts.

The losses experienced by Northern European pension funds in 2008 have been on such a large scale that only a fraction has so-far been recouped. Whilst some cases are resolved within two years of being filed, many, as effectively demonstrated by the high-profile case against Enron Corp., will take several years before reaching resolution or settlement. A study by Nera Consulting showed that at the end of 2009, over four fifths of filings related to the financial markets crisis were still unresolved. Furthermore, for cases filed in 2008 and 2009, median investor losses rose by two fifths compared to previous years – to over $500 million [1]. Securities class actions experienced a surge in Q2 2010, with the annual number of filings set to be more than experienced in 2008, yet fewer than in 2009 [2]. However, total settlement amounts in the first half of 2010 fell in comparison to 2009 levels. Once these credit crunch related cases come to resolution, the number and the size of settlements are likely to increase, as quantified by GOAL’s research. Whilst pressure exerted on pension funds by the economic downturn appears to be easing, there is nevertheless a pressing duty of care for institutional investors and fund managers to act now if they are to recoup significant losses suffered at the peak of the financial markets crisis.

The recent abundance of high-profile cases in the UK and throughout Northern Europe has helped raise awareness of the opportunities to claim. In March 2009, Merseyside and North Yorkshire pension funds filed a motion to become lead plaintiffs in a U.S. securities class action against Royal Bank of Scotland (RBS). Similarly, Avon Pension Fund, was granted lead plaintiff status in a case against UK-listed GlaxoSmithKline, Other examples include Lothian Pension Fund and the Northern Ireland Local Government Officer Superannuation Committee (NILGOSC) which were both granted co-lead plaintiff status in August 2008 against Lehman Bros over their mortgage-backed securities.

If investors and fund managers are to recoup a proportion of their losses through class action litigation, either in US or European courts, now is the time to become actively involved in the filing and participation process. However, keeping track of the opportunities to make a claim and the processes required to do so successfully, can be a complicated and daunting task – with many investors mistakenly be­lieving that the cost and time involved will outweigh the benefits. In fact, specialist services are now available to handle the class action participation process, often on a no-win, no-fee basis.

Tony Doyle, Senior Investment Manager- Equities & Corporate Governance, West Midlands Pension Fund, comments, “We have been involved in numerous class actions over the years, varying in size, including A.T. & T. Wireless, Cable & Wireless, Federal Home Loan and Royal Ahold NV. We have recovered over $ 900,000 to date. The Fund has always supported good governance, challenging companies that do not meet best practice. We perceive poor governance as a risk to a fund’s long-term financial interests. The Fund therefore submits class actions globally where it believes that it has suffered a financial loss through fraudulent or irresponsible corporate behaviour. “

Stephen Everard, Managing Director, GOAL Group, comments, “Our research shows that aside from employing class actions to fulfil corporate governance responsibilities, there is a growing need for UK pension funds to plug the escalating pensions gap, particularly as a result of losses suffered during the financial markets crisis. As credit crisis borne cases continue to be brought through 2010, filings are likely to give way to Ponzi scheme allegation cases and standard securities actions. Fund managers should therefore be proactively filing and participating in class actions now, if they are to be included in what are likely to be the most sizeable settlements over the next 3 to 5 years, those emerging from the economic crisis.”

Published by The Financial Times: September 26, 2010

Foreign investors in companies sued for corporate misbehaviour in the US could be penalised by a recent Supreme Court ruling.

Pension funds in Europe, for example, will no longer be entitled to compensation ordered by the US courts from companies found to have misled investors – if their shares were bought outside the US.

The June ruling in Morrison v National Australia Bank established that claims brought in the US courts by foreign investors who purchased securities in foreign companies on foreign exchanges (known as F-cubed actions) would not be allowed to proceed.

Class actions services specialist Goal Group predicts £1.4bn ($2.2bn) will be recouped by UK pension funds through US class action lawsuits connected to 2008 credit crunch losses.

Investors who bought shares on US exchanges will still be able to claim their share, but otherwise they may find they are debarred from receiving compensation. If they still hold the shares of the delinquent company, they will effectively be bearing the cost of compensating other shareholders.

“Over the past 10 years, US plaintiff firms have been coming to the UK to try and drum up interest” in joining US class actions, said David Greene, a partner at Edwin Coe, a London law firm that pursues security class actions. In many cases, these were F-cubed actions, where it was not clear they could be heard in US courts. “A lot of people were saying ‘why are you doing that?’ [of the F-cubed actions] and the result was that the Supreme Court has effectively chucked them out,” he said.

UK pension funds based outside London led the trend for participating in class actions, said Mr Greene. The West Midlands Pension Fund, for example, has recovered more than $900,000 to date through its involvement in class actions against Cable & Wireless, AT&T and Royal Ahold, among others.

Similar redress for investment losses attributable to corporate misbehaviour will no longer be available unless the pension funds have bought their shares in the US.

“The point is now being made that if you want to get the protection of the American litigation system, you have to buy on a US exchange,” said Mr Greene.

The long-term effects of the ruling are not yet clear, with some commentators predicting a rush of litigation in European courts.

“European investors have become accustomed to being able to recover under US law when they have lost money. Having had a mechanism of recovery, they are going to be more frustrated now that it has been removed,” said Jay Eisenhofer, managing director of Grant & Eisenhofer, a US law firm specialising in securities litigation.

Turning to European courts may be hard work, however, as many jurisdictions are not particularly shareholder-friendly, and litigants are not entitled to pick and choose which jurisdiction they sue in, he cautioned.

The UK and German legal systems, for example, are less attractive to claimants than the Netherlands, he said.

Investors in various jurisdictions around the world have historically been reluctant to use litigation for this purpose, but this attitude is changing, according to Stephen Everard, managing director of Goal Group.

“Litigation is becoming a really global phenomenon. I do a lot of work in Singapore and Hong Kong, for example, which are not typically litigious societies.”

Copyright The Financial Times Limited 2010.

Financial Times – 17/09/2010

Thousands of private investors in overseas shares and exchange traded funds (ETFs) based abroad could be paying more tax than necessary on dividends by failing to file foreign ownership paperwork or not claiming back excess deductions.

So-called withholding tax deductions of as much as 30 per cent in the US – the most popular overseas market for UK shareholders – and 35 per cent in Switzerland mean that UK taxpayers can, in effect, end up “paying tax twice”.

Typically, only about 15 percentage points of these overseas deductions can be credited against UK tax liabilities.

According to Goal Group, which specialises in withholding tax reclamation, UK retail investors are collectively missing out on many millions of pounds of reclaimable overseas tax, largely because of “red tape” and the cost of claiming in some countries.

“Those with significant shareholdings know how to reclaim or will be advised, but small investors will be hit,” it says.

John Whiting, policy director at the Chartered Institute of Taxation, says: “Many investors will not even be aware of withholding tax as an issue (with overseas shares).”

When buying US shares, a “good broker” should ensure investors correctly complete a W-8BEN “certificate of foreign status” form, according to Roger Lawson, former director of the UK Shareholders Association (UKSA). This form ensures that only 15 per cent tax – rather than 30 per cent – is deducted at source from dividends. That remaining 15 per cent can then be offset against UK tax bills.

But while brokers including TD Waterhouse and Charles Schwab insist a W-8BEN is completed before clients can trade, Halifax Sharedealing and Interactive Investor leave this paperwork for the investor to sort out.

Halifax, which regularly runs commission-free dealing offers for overseas shares, says that because the US forms need to be refiled every three years, it decided to leave the responsibility with investors after encountering difficulties getting clients to send back updated paperwork.

Even where investors do complete a form, minor errors – including abbreviating country of residence to “UK”, rather than spelling out “United Kingdom” – can lead to the preferential 15 per cent rate not being given, warns James Daly of TD Waterhouse. The broker has to send back “so many” forms to investors for correction, he adds, because of the “extremely strict” US requirements.

Goal adds that many brokers “don’t have the right people” to ensure that the tax paperwork is in order, resulting in “significant” numbers of investors overpaying. As well as having 30 per cent tax deducted from dividends, in some cases 28 per cent can also be withheld from the proceeds of US share sales, it warns.

Tax overpayments can be reclaimed for the previous two years in the US, but this can be a lengthy procedure. With other countries, such as Switzerland, investors only have the option of reclaiming – no “relief at source” is on offer to reduce the 35 per cent deduction.

Goal points out that the Swiss reclamation procedure involves an English-language form and “is nowhere near as complicated as in the US”.

However, to reclaim tax in Italy, Spain or France, investors need to go through an agent – an extra cost that may make the exercise not worthwhile. French withholding tax on dividends is generally 25 per cent, while investors in the widely-held Spanish bank Santander can in theory reclaim four percentage points of Spain’s 19 per cent deduction.

Goal offers a fixed-fee service charging up to about £100 for reclaims and said this week it planned to put a free e-reclaim service on its website (GoalGroup.com) allowing investors to download the necessary claim forms.

Separately, Santander investors can avoid all of the 19 per cent withholding tax on their next quarterly dividend, due in November, by taking the payout in stock rather than cash form.

Details of this “scrip dividend” option were sent out last month to shareholders in the bank’s nominee service.

One of the largest legal battles in history all started when Stephanie Odle, an assistant manager at Wal-Mart subsidiary Sam’s Club, realized she was making over $20,000 less than a male assistant manager at a Sam’s Club where she had previously been employed.  Her case became the starting point for a 2001 class action lawsuit alleging that Wal-Mart systemically discriminates against women.

Wal-Mart has been fighting the case for about nine years and recently asked the U.S. Supreme Court to review the case. For Wal-Mart the stakes could hardly be higher.  If the company loses it could easily end up paying over one billion dollars in back pay and punitive damages on top of the already massive damage to the retailer’s image.

The current legal issue being sorted out is whether or not the case meets the criteria for a class action.  Wal-Mart is arguing that that since each store operates as an independent store the rules of class action lawsuit do not apply because the discrimination problem is not company-wide.

So far Wal-Mart has not been faring well in court.  The United States Court of Appeals for the 9^th Circuit in San Francisco ruled 6-5 that the lawsuit should proceed as a class action lawsuit.  This is the fourth court decision upholding the case’s status as a class action.

Wal-Mart says the women should bring their cases against individual stores, so the cases would be smaller and less unwieldy. Of course there is no established size limit on class action lawsuits, so it is not surprising that this argument has not helped up so far.

Others have argued in favour of Wal-Mart that the immense scope of the case prevents individual women from presenting their own cases and getting their day in court.  The Supreme Court will have the final word on the matter, and decide whether or not it meets the current standards for a class action suit.

Either way, it is a lose-lose situation for Wal-mart, and the company is desperately looking for creative class action lawsuit solutions.  It is less clear how the case will affect British retailer ASDA, which is owned by the Leeds based Corinth Services Limited, a subsidiary of Wal-Mart.

ASDA has not had the same problems with sex discrimination as Wal-Mart. It is possible, however, that the company’s association with Wal-Mart during a time of intensely anti-Wal-Mart PR could tarnish its image.

Since the lawsuit began Wal-Mart has started hiring more women, and promoting more women to management positions.  Due to this response by Wal-Mart, Ms. Odle, said “We’ve already won because they already had to change their policies toward women because of us”.

Whatever decision the Supreme Court makes, it will have a significant impact on how class actions involving large numbers of plaintiffs and still larger companies are handled.

Saghar Bigwood, Executive Director comments “this accreditation is testament to the quality-driven work ethic which prevails throughout all areas of our business and underlines our commitment to continuous improvement”.

Superannuation and asset managers in Australia had failed to claim a combined $3.5 billion in compensation from 2007 to 2009, said London-based Goal Group, a class action services specialist.

Of this total, $1.8bn belongs to corporate and industry superannuation funds, while $1.7bn belongs to public sector superannuation funds.

The report found that more than $110bn has been lost by Australian superannuation funds on their investments in this period, acting as a wake-up call to those now forgoing their legal right to claim damages through the US.

With the onset of the financial markets crisis — the collapse of the subprime mortgage market and the emergence of fraudulent Ponzi schemes — Australian superannuation funds’ awareness of class actions has risen significantly.

In addition, the subprime-related crisis has triggered a wave of class action lawsuits and Australian investors are likely to miss out on billions more in the coming years unless they take steps to recoup money, according to Goal Group managing director Stephen Everard.

Speaking after a round of meetings with Australian asset managers and regulators, Mr Everard said: “We’ve found that institutional investors in Australia, from large commercial retail master trusts to government sector funds that have been hard hit by their failure to take part in US securities class action litigation, are now very much aware.

“Several substantial investors have asked us for a detailed breakdown of how their portfolios may have missed out through lost opportunities to claim compensation that was rightfully theirs,” he said.

Investors typically need to register with a lead plaintiff or law firm filing a class action lawsuit, but Australian shareholders and their fund custodians have traditionally been averse to corporate confrontation or have shied away because of a perceived inability to track an often complicated claims process.

Mr Everard said institutional directors had a clear duty of care to register claims in US courts on behalf on their clients.

“Our research shows that non-participation is costing these investors dearly,” he said.

Mr Everard said that a downturn in filings in 2006 raised the possibility that shareholder class actions were on the wane.

“But we see interest in class actions as likely to expand further to failed investments in the US, specifically with funds being approached regarding their losses through investments in US Ponzi schemes.”

Last year, 32 class actions relating to subprime debt alone were filed in the US. These were mainly against mortgage companies and lenders.

“We can see 320 class actions around the world at the moment, of which 300 would be against US-based companies,” Mr Everard said.

Lawyers say the financial crisis will spawn hundreds of further class actions against institutions that have taken writedowns.

The group claimed that a recent study has revealed that between 2007 and 2009 the reluctance to engage in class actions has resulted in some $3.5 billion being “left on the table”. $1.8 billion of this could have gone to Australian corporate and industry funds, and $1.7 billion to Australian public sector funds.

The report claimed that more than $110 billion was lost by Australian superannuation funds on their investments in 2007-2009, something that should act as a wake-up call for funds that are neglecting their right to claim damages in the US.

The London-based group claimed there was a substantial opportunity for superannuation funds to continue to reduce the pensions gap through class actions.

The Securities Class Action Services (SCAS) top 50 study found Coughlin & Co helped their clients to agree 34 shareholder settlements in 2009, worth $1.58bn (E1.2bn)

The top 50 plaintiffs’ law firms were ranked according to the total sums in dollars of redress they generated  through securities class action settlements by serving clients either as lead or co-lead counsel.

Law firm Milberg came a close second in the top 50, with redress worth $1.44bn, although the sums involved in individual cases were higher on average as it was involved in 10 cases, compared with Couhglin & Co’s 34 settlements which generated an average settlement of $46.4m per case.

Bernstein Liebhard ended the year in third place with total settlements worth almost $1.02bn while Barroway Topaz Kessler Meltzer & Check was fourth with $889m and Barrack, Rodos & Bacine was just behind in fifth with $887m in settlements last year. The assessment did not count derivatives case settlements.

While this demonstrates the sums of money that can be involved in securities class actions,  concerns have been raised about the UK government’s decision to remove a mechanism for delivering class actions in the UK.

Changes allowing groups of European investors to seek redress from the financial services industry were removed from the Financial Services Bill 2010 at the last minute, just ahead of Parliament being dissolved, in a bid to push the FSB through.

Yet  Stephen Everard, managing director of Goal Group, said this leaves investors, including pension funds, without a route for ensuring corporations maintain good corporate governance.

“The main goals of the class actions mechanism are generally viewed as improving corporate governance and strengthening shareholder rights – in other words, encouraging corporate management to behave honestly and responsibly and providing a means of redress if this does not happen,” said Everard.

“It is therefore disappointing that the proposed amends to the Financial Services Bill will be dropped as there evidently is a need for class actions to be included. A number of European investors – including those in the UK – currently have no right to redress as there is no efficient way to bring a joint lawsuit despite having suffered fraudulent or irresponsible corporate behaviour.

He notes the need for some of recourse system was previously highlighted by the UK’s Civil Justice Council when they argued “there is a need for better redress of common grievance which have allegedly given rise to monetary loss and damage to a class of claimants”.

While most class actions are still conducted in the US, as the RiskMetrics study of legal firms backs up, there are other legal models to adopt as there have been occasional legal cases in the Netherlands, and this legal framework could suit the needs of European investors, suggests Goal

What this case essentially refers to is the sub prime crisis in America and how major investment banks tried to hide or downplay their toxic assets. Unfortunately many major investment banks put together complex financial products with unsuitable foundations.

So when millions of Americans were unable to pay their mortgages, the financial products which contained millions of bad loans started losing money on the stock market and so the downward spiral began. Bad and over ambitious lending ending up costing much more than just property, the impact was felt around the world.

It is alleged that Goldman Sachs failed to disclose and misrepresented important facts, which the company had full knowledge of but was recklessly disregarded, particularly when marketing the financial products.

It is argued that statements about Goldman Sachs client focused business model, risk controls and business practices. In addition statements made in an effort to downplay profits made by Goldman Sachs from shorting the property market.

Essentially what this means is that Goldman Sachs placed bets that the property market would go down, and funnily enough it did. After all people had big mortgages and were living beyond their means, it was bound to.

Goldman Sachs also failed to disclose that the Securities and Exchange Commission (SEC) had opened an investigation into their activities since mid 2008, although how much of a difference it would have made is unclear due to the fact it was reported that nearly everyone at the SEC was far too busy looking at “inappropriate material” all day long.

This class action lawsuit is still gathering momentum and if you want to be part of the suit the deadline to apply is the 25^th of June. If you are considering this you will need to contact the Law office of Brodsky & Smith.

In 1950 two doctors working with the British Medical Research Council, Professor Austin Bradford Hill and Dr Richard Doll, published a paper which shook the scientific community to its core. The findings, which are today undisputed, demonstrated an undeniable association between tobacco and cancer.

Despite this, when the Minister of Health declared that the UK government fully acknowledged these facts, he was smoking a cigarette whilst making the announcement.

It would appear that Phillip Morris, R.J. Reynolds and Lorillard have the same bold attitude as the British Minister of Health in 1957. They are fully aware of the damage their product does but will push the law to the limits in order to make sales and profit.

A good example of pushing the rules to the limit can be found with Marlboro sponsoring the Ferrari F1 team. Doctors have urged governments to launch enquiries into ‘subliminal’ tobacco advertising as they believe the red, white and black bar code on Ferrari F1 cars and overalls is designed to remind viewers of Marlboro branding.

Phillip Morris, R.J. Reynolds and Lorillard planned class action lawsuit is because in the last six months New York has required retailers to display posters with stomach-churning photos that show the effects of prolonged tobacco use. In addition there are signs with the warning we are familiar with such as “smoking causes lung cancer”.

The tobacco manufacturers argue that the images and signs are doing the federal government’s job of regulating tobacco packaging. They further argue that this is a violation of the First Amendment, because it forces store owners to display signs even if they disagree with their message. Adding more weight to the class actions, The New York State Association of Convenience Stores, a non-profit trade organisation made up of 250 companies joined the suit.

The lawsuit goes on to argue that these signs crowd out other advertising which might otherwise dominate the point of sale in smaller establishments. Their lawyers believe that New York doesn’t have the right to force other people to adopt its views, believing it to be the biggest nanny state in the States.

Come 2012 class action lawyers in America will be very busy if this is anything to go by because federal standards will force tobacco companies to cover at least 50% of the package thanks to President Obama’s Family Smoking Prevention and Tobacco Control Act.

You could also argue that instead of spending billions on drilling for oil, that money could have been used to setup solar energy farms in places like New Mexico, Arizona and Utah, because when we do run out of oil, not just solar energy but all forms of renewable energy will be imperative.

Here in the UK we aren’t blessed three hundred days of sun a year. However being and Island nation with a huge coast line we should really putting our eggs in the wave power and wind power technology baskets. If anything comes from this disaster it should be the worldwide understanding that we cannot continue burning fossil fuels at this rate without thinking about the impact and how to deal with it

Whilst one manmade disaster continues to strain the Anglo American friendship, a small natural disaster is just settling down. The Icelandic volcano which spat spewed volcanic ash into the atmosphere which grounded planes and cost companies and economies billions.

When passengers did return home, Ryanair was apparently inundated with compensation claims. The sheer scale of the legal challenge Ryanair faces is like a flashback to the Enron class action lawsuits. The Dublin based carrier at first refused to pay the compensation claims of about 300,000 passengers who were caught up in travel chaos.

The Ryanair boss, Michael O’Leary has said that the airline would attempt to force changes in the regulations by rejecting up to twenty of the most expensive claims. He stated “We will take on 10 or 20 of the most ludicrous claims. We have claims coming from bastards who paid €30 (£25) [for a ticket] and are seeking €3,000 back. We will take a few of those as test cases”.

The airline is expected to take on the most contentious compensation claims in local courts and then take the cases to the European Court, where if they rule in favour of Ryanair, the European Parliament will be forced to cap EU261 payments.

Michael O’Leary went on to say that the European Regulators and Britain’s civil aviation Authority made a “complete dog’s balls” of the situation by shutting European airspace.

As we all know the Deepwater Horizon oil rig was based off the cost of America and quite frankly there could not have been a worse location for there to be a massive oil spill. BP will have to navigate its way through a labyrinth of legal cases and class action lawsuits against them.

The most recent breaking news regarding the oil spill is BP’s decision to pay for the construction of six sand barriers off the coast of the US state of Louisiana in an attempt to protect the fragile wetlands.

At this stage the oil slick has reached Louisiana, a small part of Mississippi, Alabama and is now expected to reach Florida in a few days and it would seem people are already preparing their legal cases.

Several restaurants from Louisiana and Florida have decided to take a proactive step towards recovery by filing a class action case against BP, whom the U.S. Coast Guard has identified as the “responsible party,” according to the Oil Pollution Act.

The class action, dated May 18, was filed on behalf of several plaintiffs who are restaurant owners and others in the seafood service industry who have or will suffer lost profits as a result of the subsequent oil spill following the sinking of the Deepwater Horizon oil rig.

BP also hired workers to help clean up the oil spill, both on the sea surface and on land. It didn’t take too long before workers starting being hospitalised in increasing numbers with high blood pressure, nausea and pounding headaches.

Many of the workers BP hired were fishing crews and they were given a dispersant called Corexit, which is supposed to break the oil into small droplets that are biodegradable. The company which produces the product and BP claim it is safe, but just to be on the safe side Federal agencies have asked BP to limit its use.

If BP thought the worst was over, they were wrong. The “top kill” strategy which has so far failed was a real setback for the company. Every second the leak continues only adds to an already giant bill which BT will have to foot.

Whilst the oil continues to leak BP takes hits from all directions. The share price has suffered with billions wiped of the company’s value. They are losing the very thing they went drilling for in vast quantities, they have agreed to pay for all the clean-up costs, which will go well past $1 billion dollars.

Eleven people died when the oil rig exploded and it is now the biggest man-made disaster in the country’s history. President Obama and his administration have been less than impressed by BP having missed deadline after deadline to fix the leak. The credit rating agency, Fitch has downgraded BP from an AA+ rating to AA.

It is highly plausible that BP will continue to clear up the physical damage from the oil leak for months and it could take years before the legal mess has been sorted out because class actions will be coming at the thick and fast.

As for BP’s relationship with America, it is unlikely to ever fully recover from such a blow.

Since then things have changed tremendously and there are thousands of British people who currently or have previously owned property in Spain. The attractions of a home in the Mediterranean have proven to be a winner in the UK.

It now seems that Spanish property investors could be entitled to a refund of their Spanish Capital Gains tax. This means if any of you sold a Spanish property between January 1st 1997 and December 31st 2006 you can get your money back.

How is this possible?

A recent ruling by the European Court of Justice (ECJ) confirmed that that non-Spanish residents were unfairly charged 35% in Capital Gains Tax compared to 15% charged to local Spanish residents. As a result it is now possible to submit a claim to get the 20% difference back from the Spanish Tax authorities.

It has been estimated that the homeowners who sold since 1997 could be due an average £13,500 tax reclaim. As a result, former Spain property owners could be entitled to claim a tax refund for missing interest at a rate of 6% from the date the reclaim is presented, making it possible for the total reclaim to be even higher.

Commenting on the subject, Eduardo Fernandez Martinez, expert in the Spanish Property Tax sector had this to say, “This is breaking news for the non-resident taxpayer.

The Spanish Tax Authorities have been inundated with claims since the ruling of the ECJ. The result that it was both discriminatory and unfair to charge a higher tax percentage is both deserved and overdue. Non-residents will now get what is indebted to them for investing in Spain for years.”

How do I know if I qualify?

The qualification process is simple.

- You sold your Spanish property between January 1^st 1997 and December 31^st 2006.

- When you sold your property you were not a Spanish Resident

- You have a copy of the purchase and sale deeds of your property

- You have the Spanish Tax form Modelo 211 and / or Modelo 212

What next?

There are a number of organisations which are trying to help people facing this challenge. If you do meet the criteria, it is recommended that you do some research into your property and make sure you have all the required documentation.

It is then a question of finding the right organisation to help you.

It is therefore, disappointing that the proposed amends to the Financial Service Bill will be dropped as there evidently is a need for class actions to be included.

A number of European investors, including those in the UK, currently have no right to redress – in other words, no efficient way to bring a joint lawsuit – despite having suffered fraudulent or irresponsible corporate behaviour.

The need for an efficient reclamation system was highlighted by a recent report from the Civil Justice Council stating that there is an “unmet need” for better redress of common grievances which have allegedly given rise to monetary loss and damage to a class of claimants.

It is true that any amends merit detailed thought and a concise explanation of how the provisions work – but not to the point of atrophy. There are several successful and fair class action models around the globe adopted by legislatures other than the US such as in Australia, Canada and the Netherlands, on which this could be based.

Stephen Everad,
Managing Director,
Goal Group

By exposing these guilty companies for what they are, we are hopefully preventing the same mistake from happening again. It is therefore vital that when a company is proven guilty in class action lawsuit that it is well documented.

Charles Schwab Corp (SCHW.N) is one such company and they agreed to pay $200 million to settle a federal class-action lawsuit targeting its money-losing YieldPlus mutual fund, erasing nearly all of its first quarter profit.

Schwab in 2008 became the target of litigation and regulatory probes focused on its YieldPlus Fund, a short-duration bond fund that plunged in value following the 2007 credit crisis.

A judge last month said it violated U.S. law in failing to get shareholder approval before putting half the fund’s assets into uninsured mortgage-backed securities.

The settlement forces the brokerage and asset manager to restate first-quarter results that were announced last Thursday. Schwab said it increased its contingency reserve by $172 million pretax, reducing first quarter profit by about $105 million, or 9 cents a share.

That nearly wipes out the $119 million of reported profit, or 10 cents a share. San Francisco-based Schwab previously had set just $11 million aside for potential liability after a summary judgment ruling of liability was issued March 30 with respect to a California state lawsuit.

Schwab did not admit wrongdoing

The settlement is preliminary and subject to a definitive agreement as well as court approval. “We will move as quickly as we can” on getting the approval, said Schwab spokesman Greg Gable.

YieldPlus investors had sought to recover $970 million in damages resulting from the fund’s exposure to the collapsing housing and credit markets. Last week, Schwab for the first time said it could be on the hook for as much as $890 million in litigation.

“We had expected the company to settle ahead of the May 10 trial date and the total fine … is smaller than what many had feared,” wrote UBS analyst Alex Kramm.

Schwab, which runs a big online brokerage unit and offers investment advice, called the settlement “the most effective way for us to move forward.”

The company said it will continue to evaluate the size of its contingency reserve pending the final resolution of the securities class action suit, and warned its total liability related to YieldPlus could be still higher.

Schwab says it cannot estimate its liability related to regulatory probes, and so has not established a reserve.

A senior European official said there was no clear scientific evidence behind the model, which air traffic control services used to justify the unprecedented shut down.

Eleven major British airlines joined forces last night to publicly criticise Nats, the air traffic control centre, over the way it interpreted the Met Office’s “very limited empirical data”.

Legal experts suggested passengers and airlines may be able to sue the Government for more than £1 billion in compensation.

Flights in and out of Britain are scheduled to resume today for the first time in almost a week after Lord Adonis, the Transport Secretary, said there had been a “dramatic decrease” in the volcano’s activity.

The announcement last night that restrictions would be eased was accompanied by arguments over whether the shutdown had been an over-reaction.

Much of the blame was directed at the Met Office’s Volcanic Ash Advisory Centre (VAAC). It provided the initial warning, which triggered the European-wide ban via Eurocontrol, the air traffic control centre in Brussels.

Of the 40 test flights across Europe, including a British Airways flight on Sunday, none found any evidence of ash in jet engines, windows or lubrication systems.

In a joint letter to Lord Adonis, the 11 British airlines said the official response to the volcanic eruption presented “a clear case for government compensation”.

Jeff Zindani, of Forum Law solicitors, said: “Legal analysis suggests that there may be a raft of class actions brought by airlines and companies that are dependent on air travel to move their goods.

“This may well open the way for wider litigation against the Met Office and other government agencies that are found to have failed in their duty of care. The damages and legal costs could break the £1 billion mark.”

Andy Harrison, the chief executive of easyJet, said the cost could run into “hundreds of millions of pounds”. The cost to the wider British economy has been estimated at £500 million.

British Airways announced it planned to begin flying from London from 4pm after Willie Walsh, its chief executive, said the blanket ban had been “unnecessary”. Virgin Atlantic said it hoped to operate flights from London from 7pm.

David Greene, the head of litigation at Edwin Coe, said legal action was more likely to be successful if taken by a large group of tourists and companies in a class action.

There are several reasons why Goldman Sachs is now viewed by many as a morally corrupt company and the results of their malpractice could yet deal a major blow to the US economy and others around the world and result in class action.

Lloyd Blankfein - Goldman Chief Executive

Lloyd Blankfein, Goldman’s chief executive, admitted in a voicemail to all staff yesterday that the attention that followed the securities fraud charges was “certainly uncomfortable”, but that the board and management committee were addressing the charges.

The bank also issued a statement again denying the US Securities and Exchange Commission accusations that it or its employees tricked clients into buying bad loans in 2007. Fabrice Tourre, who did the deals over which Goldman has been charged, has been put on paid leave and is at home.

Goldman also faces the loss of lucrative British government work — including a host of planned privatisations — after the Prime Minister described the bank as morally bankrupt.

Why do so many hate Goldman Sachs?

• Lloyd Blankfein, Goldman’s chairman and chief executive, and Gary Cohn, the bank’s president, annoyed the US Administration by suggesting that the bank would have survived the financial crisis without government help. They reversed that position in a letter to shareholders two weeks ago, saying: “Goldman is grateful for the indispensable role governments played.”

• Goldman incensed politicians before its 2009 results announcement in January by apparently planning to pay record bonuses. It cut compensation back at the last minute to $498,000 (£300,000) per employee, lower than its peak payouts in 2007 of $661,000.

• Mr Blankfein, told The Sunday Times in November 2009 that he was doing “God’s work”. The comment went down badly with the Government and the public at a time when thousands of people were losing their jobs every month as a result of a crisis caused in part by financial firms.

• Goldman was in the spotlight for the wrong reasons again in February over its role arranging contentious derivatives trades for Greece, which helped the country to massage its public finances.

The Embattled Wall Street firm Goldman Sachs is now facing an investigation by the City watchdog, the Financial Services Authority, following the $1bn (£650m) fraud allegations brought by the US regulators.

Their defence?

Goldman Sachs insisted its actions were “entirely appropriate” and that it would “vigorously contest” the charges brought by the US Securities and Exchange Commission (SEC).

The statement comes ahead of the bank’s first-quarter results tomorrow, which are expected to show it has been able to earmark $5bn for staff pay and bonuses.

Goldman believes the charges are politically motivated and come at a time when President Barack Obama is trying to force through legislative changes to clean up the US banking industry, which may lead to further securities class actions.

Action across the pond!

The FSA confirmed today that it was investigating the events. “As you would expect the FSA is investigating the circumstances of this case and whether there are any implications for the UK-regulated entities of Goldman Sachs.

If there are, we will take appropriate action. We are working closely with overseas regulators and will co-operate fully with the SEC investigation” the FSA said.

In a detailed statement today, Goldman stepped up its defence. It said: “Based on all that we have learned, we believe that the firm’s actions were entirely appropriate, and will take all steps necessary to defend the firm and its reputation by making the true facts known.”

What are the charges?

The SEC’s 22-page suit charges Goldman with working with US hedge fund, Paulson & Co, to structure and sell a complex package of mortgages to clients while Paulson took a “short” position betting that the same mortgages would fail.

The mortgages were packaged into a collateralised debt obligation (CDO) – the instruments at the heart of the 2007 credit crisis – and lost investors more than $1bn in just nine months. During the same period, Paulson made a similar amount in profit. The SEC asserts that Goldman did not disclose Paulson was on the other side the transaction.

Tip of the Iceberg?

Analysts say that the case against Goldman could be the tip of a class action iceberg. A Dutch bank, Rabobank, accused Merrill Lynch over the weekend of a similar misdemeanour, claiming that Merrill marketed a collateralised debt obligation (CDO) while omitting to mention its relationship with a hedge fund betting against the product’s success, resulting in a loss of $45m. Merrill called the allegation “unfounded”.

Merrill, Citigroup and Deutsche Bank were the top three writers of mortgage-related CDOs in 2006 and 2007. All three banks saw their stock drop by more than 5% when the SEC (Securities and Exchange Commission) announced charges against Goldman on Friday.

Conclusion

The charges against Goldman Sachs are, for most, a welcome sight because of their dishonesty to investors and clients alike. Hopefully the case against the bank is a strong one with irrefutable evidence.

However there is no doubt Goldman Sachs will do everything they can to defend themselves. They will use all their cunning to try and once again sell us a story of innocence. Don’t believe it!

Published by City AM: 15th April 2010

BANKS have walked away from potentially paying out billions of pounds in class action settlements, after a clause in the Financial Services Bill surrounding the matter was struck before the bill passed though parliament.

The Financial Services Bill, which reached Royal Assent during the wash-up period last week, saw clauses 18 to 25 struck out by financial services secretary Lord Paul Myner before being passed into law.

If the clauses had been included, it would have meant that class action suits, which often equate to more than £20m a claim, could be taken against financial institutions.

The move has been seen by some groups as a blow to shareholder rights and corporate governance.

“A number of European investors including those in the UK – currently have no right to redress and no efficient way to bring a joint lawsuit despite having suffered fraudulent or irresponsible corporate behaviour,” said Stephen Everard, managing director at Goal Group.

Lawmakers, however, have said the issue of consumer redress is likely to come up before parliament again, as bodies such as the Civil Justice Council will continue to lobby on the matter.

Last year, the average amount of class action settlements rose to $37m (£23.9m), according to Cornerstone Research.

Banks have walked away from potentially paying out billions of pounds in class action settlements, after a clause in the Financial Services Bill surrounding the matter was struck before the bill passed though parliament.

The Financial Services Bill, which reached Royal Assent during the wash-up period last week, saw clauses 18 to 25 struck out by financial services secretary Lord Paul Myner before being passed into law.

If the clauses had been included, it would have meant that class action suits, which often equate to more than £20m a claim, could be taken against financial institutions.

The move has been seen by some groups as a blow to shareholder rights and corporate governance.

“A number of European investors including those in the UK – currently have no right to redress and no efficient way to bring a joint lawsuit despite having suffered fraudulent or irresponsible corporate behaviour,” said Stephen Everard, managing director at Goal Group.

Lawmakers, however, have said the issue of consumer redress is likely to come up before parliament again, as bodies such as the Civil Justice Council will continue to lobby on the matter.

Last year, the average amount of class action settlements rose to $37m (£23.9m), according to Cornerstone Research.

Legal firm Goal Group said the government’s decision to drop class action mechanism for disputes with financial services firms from new legislation was “disappointing”.

Stephen Everard, managing director at Goal Group, said there was a need for class actions to be included in the bill.

He said: “The main goals of the class actions mechanism are generally viewed as improving corporate governance and strengthening shareholder rights – in other words, encouraging corporate management to behave honestly and responsibly and providing a means of redress if this does not happen.

“A number of European investors – including those in the UK – currently have no right to redress – no efficient way to bring a joint lawsuit despite having suffered fraudulent or irresponsible corporate behaviour.”

Mr Everard said the need for an efficient reclamation system had been highlighted by a recent report from the Civil Justice Council – which advises the Lord Chancellor.

He added: “It is true that any amends merit detailed thought and a concise explanation of how the provisions would work – but not to the point of atrophy.

“There are several successful and fair class action models around the globe adopted by legislatures other than the US such as in Australia, Canada and the Netherlands on which this could be based.”

Outspoken corporate governance advocate Lord Paul Myners’ decision to omit the relevant clauses from the financial services bill during the ‘wash-up’ period, in which bills are rushed through in time for the next parliament, has angered lawyers and other legal service providers.

But Goal Group managing director Stephen Everard complained the decision has hampered attempts to encourage corporate management to behave responsibly.

“The main goals of the class actions mechanism are improving corporate governance and strengthening shareholder rights,” he said. “It is therefore disappointing the proposed amendments to the financial services bill will be dropped, as there evidently is a need for class actions to be included.”

A recent report from the Civil Justice Council recognised there was an “unmet need” for better compensation for potential financial services litigants.

Everard added: “There are several successful and fair class action models around the globe on which [a UK version] could be based.”

Patrick Daniels, class action specialist for Robbins, Geller, Rudman and Dowd, agreed, but believes class action in the UK could still be forthcoming.

He cited the government’s recent involvement with the US Supreme Court in the National Bank of Australia case, which involved the rights of British and other foreign investors to participate in US class actions involving non-US corporates.

He said: “The government urged the Supreme Court to severely limit the rights of foreign investors to do so, explaining the UK courts provided ample protections and rights for defrauded investors to pursue claims.

“In filing the brief, the government all but invited investors to pursue these cases in English courts. I have no doubt you will see more actions brought in Britain.”

Mathew Rutter, financial services partner at Beachcroft, said: “When the Bill was first published, we called it a dangerous cocktail. With some of the more toxic elements removed, and some equally dangerous amendments headed off, the Act is not as lethal as it might have been. However, enough unpleasant ingredients are left in it to leave a sour taste.

“We are delighted that pressure from the financial services sector and from firms such as Beachcroft on this issue appears to have been successful. This will come as a great relief to firms, not because they oppose the principle of redress for consumers, but because these provisions had not been fully thought through, and much of the detail needed to assess them was missing.

However, the tide seems to be turning in favour of class actions in some form in the UK, so this is unlikely to be the last we hear of them. It will be important, however, to ensure that everyone has time to consider such proposals in detail, rather than trying to rush measures through and regretting it later.”

For some, it always felt as if the right for disgruntled consumers to take “class actions” against financial firms was added to the financial services bill at the eleventh hour. Little surprise, then, that the planned provision was withdrawn in the dying days of the government to ensure that the bill, which is bringing in powers to let the FSA tear up bankers’ contracts if they are too risky, is passed.

The fact that big firms had been campaigning hard against clauses 18 to 25 that could have forced them to pay out redress to customers demonstrates this is a right consumers would have welcomed after years of mistreatment over the sales of endowment policies, pensions, split capital trusts and the like. The next government should ensure it puts the provision back on the legislative agenda.

The satirical cartoon’s 200th episode, unsurprisingly titled 200, sees the residents of the Colorado town subjected to a class action lawsuit by the lengthy list of celebrities lampooned during the animation’s 14-year history.

Whether or not these celebrities are actually going to sue the creators of South is yet to be seen but it is highly doubtful. With all the people they have insulted it is hard to imagine anyone famous who wouldn’t mind suing South Park for every penny. However there are two things which provide major obstacles to anyone considering it. The first is the American constitution, specifically the first amendment which centres on freedom of speech. Secondly, before every episode of South Park they show a disclaimer.

Tom Cruise memorably appeared in an episode  entitled Trapped in the Closet in which the alleged tenets of Scientology were outlined while Steven Spielberg and George Lucas were controversially depicted raping the character Indiana Jones – a reference to fans’ disappointment at the fourth film in the franchise, Indiana Jones and the Kingdom of the Crystal Skull.

Other celebrities featured in 200 will include Phil Collins, Hillary Clinton, baseball player Barry Bonds and Oscar winner Russell Crowe, who was memorably, depicted travelling the world picking multiple fights.

It is easy to see why some people have a problem with South Park however what some construe as the simplest of humour is in fact very intelligent. The creators of the show don’t single out race, religion or country because they will mock any race, religion or country, including themselves. In addition, the episode typically ends with the moral middle ground being explained. As an American show that understands and regularly practices satire, South Park should be embraced by the UK, the masters of satire!

Below is a quick preview for your viewing pleasure!

The class action lawsuit brought by residents from southern Mississippi, which was ravaged by hurricane-force winds and driving rains, was first filed just weeks after the August 2005 storm hit.

Documents state that “The plaintiffs allege that defendants’ operation of energy, fossil fuels, and chemical industries in the United States caused the emission of greenhouse gasses that contributed to global warming”.

The increase in global surface air and water temperatures “in turn caused a rise in sea levels and added to the ferocity of Hurricane Katrina, which combined to destroy the plaintiffs’ private property, as well as public property useful to them.”

More than 1,200 people died in Hurricane Katrina, which lashed the area, swamping New Orleans in Louisiana when levees gave way under the weight of the waves.

The class actions, claiming compensation and punitive damages from multinational companies including Shell, ExxonMobile, BP and Chevron, has already passed several key legal hurdles, after initially being knocked back by the lowest court.

Three federal appeals court judges decided in October 2009 that the case could be heard. However, in February the same court decided to re-examine whether it could be heard this time with nine judges.

Other companies named in the suit include Honeywell and American Electric Power, with the residents charging that “the defendants’ greenhouse gas emissions caused saltwater, debris, sediment, hazardous substances, and other materials to enter, remain on, and damage plaintiffs’ property.”

They allege that the companies had a duty to “avoid unreasonably endangering the environment, public health, public and private property.”

The district court, which initially rejected the case, ruled that it was “a debate which simply has no place in the court.”

The court argued that Congress first had to enact legislation “which sets appropriate standards by which this court can measure conduct.”

Mississippi residents must now wait for the appeals court to fix a new hearing, in principle within the next three months. A decision would then be due by the end of 2010, and both sides could also then take the case to the Supreme Court.

Recent reports reveal a Toyota memo from 2007 urging dealers to not install more than one mat in the cars for fear of obstruction of the gas pedal. The biggest problem with the memo wasn’t the memo itself, it was that almost nobody listened.

It was at this time that Toyota was aggressively pursuing a strategy of getting ahead GM as the world’s largest car manufacturer. Whatever the strategy, putting people at risk by ignoring basic safety problems, and then advertising your company on its reliability and safety, is a mistake of gargantuan proportion.

Now, 58 reported deaths in the U.S. are to blame for the faulty mat and pedal and that is in the US alone. The merging of the Class Actions currently facing the company will be lobbied at a special judicial panel. Toyota Motor Corp could face up to $10 billion in damages.

More than 8 million vehicles have been recalled by the company to avoid further accidents. “One of the reasons has to do with revising our sales plans due to the negative effects of the recalls,” Paul Nolasco, a Toyota spokesman, stated.

“The other reason is that we are getting ready to build a new hybrid vehicle in our U.K. plant. In that case it is very customary to close a plant for a few days, or even a few weeks.”

Voor OPG was het een lichtpuntje na donkere beleggingsdagen: het farmaceutische pensioenfonds kreeg een deel van de schade vergoed die het had geleden door het Lehman-faillissement. De rechtbank in Amsterdam stelde het fonds in het gelijk in een zaak tegen zijn Amerikaanse vermogensbeheerder State Street, waarna in de VS een schikking werd getroffen.
Schadeclaims zijn in Amerika al jarenlang gemeengoed maar in Europa is het een nog tamelijk nieuw fenomeen. De subprime crisis heeft ertoe geleid dat steeds meer institutionele beleggers deze methode aanwenden om de geleden beleggingspijn te verzachten.
Zaken worden individueel gevoerd, zoals OPG deed, of in een class action (collectieve procedure). Europa kent geen massaschadebeleid zoals in Amerika, dus moet telkens opnieuw worden gezocht naar de beste manier om te procederen tegen organisaties na frauduleus handelen of wanbeleid.
“Een aantal beleggers is sinds de kredietcrisis druk bezig om de balans op te maken, en gaat na of verliezen te verhalen zijn”, zegt Robert Lobo, consultant op het gebied van onder andere tax reclaim en class actions bij het bedrijf Mylette. “In Amerika is er altijd wel een legertje advocaten dat zegt: weet je wat, dat ga ik voor je uitzoeken. Dat kan resulteren in een massaclaim. Als er dan schade wordt uitgekeerd, wil de advocaat een deel van de koek.”
Critici zeggen dat class actions de rechtbanken dichtslibben; supporters menen dat het good governance stimuleert. “Class actions hebben een corrigerende functie”, zegt Kris Douma die binnen MN Services de aandeelhoudersrechten van zo’n 2000 bedrijven beheert. “Aan de ene kant probeer je de financiële schade te repareren. Aan de andere kant vertel je de markt dat frauduleuze handelingen niet door de beugel kunnen.”
Volgens Goal, een Britse specialist in schadevorderingen, zijn Nederlandse pensioenfondsen te laks in procederen: ze lieten tussen 2006 en 2007 voor liefst e450 miljoen aan ongeclaimde tegoeden liggen. Goal spreekt van een ‘alarmfase’ voor de Nederlandse pensioensector omdat gelden die de dekkingsgraad kunnen verlichten worden genegeerd.
“Een fonds gaat niet voor vijf- of tienduizend euro procederen, maar als een class action loopt, kun je eenvoudig aanhaken”, zegt Ton Coemans, die als senior legal counsel de schadeclaims van ABP initieert. “Neem de Ahold-zaak. Iedereen die aandelen in Ahold had, kreeg van zijn bank op een gegeven moment een formulier. Kwestie van invullen en je doet mee.” Een class action kan vier, vijf jaar lopen, onderstreept Coemans. “Je moet er voor zorgen dat je de procedure in de gaten houdt en niet de boot mist als tot schade-uitkering wordt overgegaan.”
Hij noemt het monitoren van en deelnemen aan collectieve claims een fiduciaire verantwoordelijkheid van pensioenfondsen. “Kleinere fondsen zullen een kosten/batenafweging moeten maken, maar excuses als imagoschade of ‘dit past niet bij ons’ gaan niet op. Ze hebben de plicht naar hun deelnemers om schade te herstellen. Vaak vergt dat niet veel. Menig fonds brengt zijn assets onder bij custodians die class actions volgen. Een simpele afspraak met je custodian kan al veel werk binnen je fonds wegnemen.”
Lobo vraagt zich af of pensioenfondsen voldoende worden ingelicht door hun custodians. “Je moet er de Service Level Agreement met je custodian op nakijken: moet je voor elke dienst apart betalen of is het
all inclusive? Iedere duizend euro die terugkomt naar de pensioenkas is ten gunste van de pensioengerechtigde of de nu premiebetalende.”
De ervaring van Bernard Verbunt, advocaat  bij Simmons & Simmons, is dat pensioenfondsen zich ‘absoluut niet de kaas van het brood laten eten’. Verbunt vertegenwoordigt pensioenfondsen PMA en BAT, die evenals OPG tegen State Street procederen. “Je krijgt van tevoren nooit 100% zekerheid dat je een procedure gaat winnen, maar als er een reële kans op succes is, laat een pensioenfonds die niet lopen. Wel is het zo dat door liquidaties als die van DSB en Icesave allerlei claimgroepen uit de grond schieten waarmee pensioenfondsen zich niet automatisch willen associëren.”
Coemans adviseert fondsen om een goed raamwerk te ontwerpen. “Het bestuur moet kunnen aantonen óf ze iets doen met schadeclaims en wát ze dan doen. Deze transparantie naar de deelnemers en toezichthouders is erg belangrijk. Bovendien is het nodig dat iemand binnen het fonds zich rekenschap geeft van het feit dat claimformulieren kunnen binnenkomen en dat daar actie op moet worden genomen. Dat vergt een bepaalde infrastructuur.”
Fondsen moeten voor zichzelf bepalen wanneer het beter is om over te gaan tot een individuele rechtszaak. Coemans: “Als gevolg van de kredietcrisis zijn meerdere financiële instellingen flink onder vuur genomen. Grote zaken waarbij ABP een eigen procedure is begonnen, zijn Wachovia en Merck. Als echt sprake is van substantiële verliezen overwegen we een eigen actie te starten.”
ABP hanteert een financiële grens voordat ze op eigen conto aan de juridische bel trekt. “We hebben een beleid in securities litigation, ofwel het voeren van aandeelhoudersclaims, dat op dit moment wordt herzien. Als we de daarin vastgestelde financiële grens overschrijden, is dat voor ons een signaal om dieper in een zaak te duiken en te bezien of deelname aan een class verstandig is danwel een eigen procedure te starten.”
Het pensioenfonds maakt sinds 2004 gebruik van een service provider die op dagbasis Amerikaanse databanken afstruint om te kijken of er nieuwe class actions zijn. “Toen we met dat systeem begonnen, was onze insteek om op een zo efficiënt mogelijke manier zoveel mogelijk schade vergoed te krijgen”, vertelt Coemans. “Maar je merkt dat de tijden veranderen; je ziet nu een ontwikkeling dat Amerikaanse rechters Europese investeerders er zoveel mogelijk van weerhouden in de VS te procederen. Europeanen worden daarmee gedwongen te kijken naar de juridische mogelijkheden op hun eigen continent.”
Het ambtenarenfonds ondervond dit aan den lijve, toen een massaclaim werd gestart tegen Shell nadat bleek dat de olie- en gasreserves schromelijk waren overdreven – het aandeel op de beurs kelderde daarna met liefst 8%. ABP begon de claim voor een schade van $150 miljoen. “We waren class member maar merkten dat er drempels werden opgeworpen. We besloten uit de class te stappen omdat de rechter onze deelname wellicht zou uitsluiten en we dan geconfronteerd werden met het verstrijken van de verjaringstermijn om te procederen.”
ABP besloot een eigen procedure te starten, en maakte gebruik van de net geopende mogelijkheid in Nederland om als groep te procederen: in 2005 werd de Wet Collectieve Afwikkeling Massaschade (WCAM) geïntroduceerd. Het Hof in Amsterdam heeft afgelopen mei een schikking tussen Shell en een stichting van benadeelden – de Nederlandse variant op een class – verbindend verklaard.
Volgens Douma loopt ons land voorop in de collectieve afwikkeling van schadeclaims in Europa. “Procederen buiten Amerika kan een grote uitdaging zijn. Het rechtssysteem in Europa is per land geregeld, en de vraag is wat we doen met al die Europese ondernemingen waar we als gevolg van boekhoud- of prospectusfraude verliezen hebben geleden.” Hij spreekt uit ervaring: zijn bedrijf wil namens klant PME procederen tegen de Royal Bank of Scotland (RBS). “We waren bereid als hoofdaanklager op te treden in een Amerikaanse class, maar de rechter wees een andere advocaat toe. We betwijfelden of die zich hard zou maken voor een Europese achterban, bovendien heeft de betreffende rechter de reputatie zoveel mogelijk Europeanen uit te sluiten.”
Evenals ABP in Shell koos ook MN Services er vanwege het verjaringsrisico voor de procedure niet af te wachten, en probeert ze nu samen met twee Britse pensioenfondsen te procederen via de High Court in Londen. In deze stad staat het hoofdkantoor van RBS. Het kan een testcasus worden in de Britse rechtspraak, die vooralsnog geen plaats biedt aan class actions. “Veel financiële hoofdkantoren zitten in Londen, dus een Britse wetswijziging zou het aandeelhoudersactivisme een enorme boost geven.”

Sommige pensioenfondsen zijn in de veronderstelling dat deelnemen aan een class action neerkomt op ‘snijden in het eigen vlees’. Het zijn tenslotte de huidige aandeelhouders die het gelag betalen voor de claimende partijen. Volgens Kris Douma, hoofd verantwoord beleggen en actief aandeelhouderschap bij MN Services, is deze vestzak-broekzak theorie onjuist. “Gedacht wordt dat de schikking van een bedrijf leidt tot een lager dividend, en dat een fonds dat kan voorkomen door niet mee te liften in de schikking. De realiteit is dat de verliezen die niet worden opgeëist, over de andere gedupeerden worden verdeeld terwijl de aandeelhouders die niet meedoen sowieso met de schade blijven zitten.” Class actions zijn niet meer weg te denken uit het globale pensioenlandschap, aldus Douma. “Het is dus onterecht te redeneren dat ze in aantal en omvang afnemen als jouw bestuur zich er afzijdig van houdt.”

There were 103 settlements totalling $3.83 billion last year, up from 97 settlements totalling $2.75 billion in 2008, according to a study set for release on Wednesday by Stanford Law School and Cornerstone Research.

Two settlements accounted for 39 percent of last year’s total: $925.5 million paid by UnitedHealth Group Inc (UNH.N) over the backdating of stock options, and $586 million to end eight years of litigation against hundreds of defendants over initial public offerings.

The median accord was unchanged from 2008, at $8 million.

Joseph Grundfest, director of Stanford Law School’s Securities Class Action Clearinghouse, said recoveries tended to be higher when large public pension funds led lawsuits, the U.S. Securities and Exchange Commission pursued related civil charges, or accounting violations were alleged.

Institutional investors were lead plaintiffs on 65 percent of the settlements, the highest percentage since the 1995 federal reform of class-action litigation, including who could serve as lead plaintiffs.

Last year’s settlements were well below record $18.3 billion in 2006, including $7.2 billion over Enron Corp.

Other busy years were 2005, when the $10.02 billion of settlements included $6.2 billion related to WorldCom Inc, and 2007, when the $7.36 billion of settlements included $3.2 billion for Tyco International Ltd.

Experts have said settlement totals should rise as cases tied to the 2008 stock market decline and credit crisis are addressed. They said such cases may fare better when plaintiffs show companies intended to defraud or deceive them, not simply that they guessed wrong about the economy or markets.

The subprime-related crisis has triggered a new wave of class action lawsuits that will lead Australian investors to miss out on additional billions in the coming years unless they take steps to recoup money, according to Goal Group managing director Stephen Everard.

As shareholders during the relevant class periods, Australian investors have often missed opportunities to claim compensation from settlements that was rightfully theirs, Everard said, perhaps due to a perceived inability to track the claims process.

Following on from GOAL’s European study published in early 2008, a new report from GOAL Group, the leading global class action services specialist, shows that between 2007 and 2009 Australian superannuation funds’ non-participation in US securities class actions resulted in over AU$3.5 billion being left on the table. Some AU$1.8 billion of this total can be attributed to Australian corporate & industry superannuation funds, whilst AU$1.7 billion originates from Australia’s public sector superannuation funds. The report found that over AU$110 billion has been lost by Australian superannuation funds on their investments in this period, acting as a wake-up call to those currently foregoing their legal right to claim damages through the US.  With the onset of the financial markets crisis – the collapse of the subprime mortgage market and the emergence of fraudulent Ponzi schemes – Australian superannuation funds’ awareness of class actions has risen significantly.

There is a substantial opportunity for superannuation funds to continue to reduce the pensions gap through class actions, and the recent abundance of high-profile cases in Australia and globally has helped raise awareness of this. Since the first local large-scale shareholder class action in 1999 – against GIO Australia Holdings, thirty-one additional securities class actions have been filed, with the number of filings steadily increasing from year to year. This is expected to expand further in the U.S courts, predominantly due to the high levels of corporate fraud and mismanagement exposure Australian superannuation funds and investors have undergone on the US markets. With a large proportion of Australia’s AU$1 trillion superannuation industry exposed to US markets [1], superannuation funds are prone to loss through fraud, negligence or general lack of corporate governance on the US markets. Australian superannuation funds’ investments are placed in many areas open to class actions, and a number of funds are currently in negotiations with class action service specialists in order to recoup their share of the huge AU$78 billion lost in Madoff Ponzi schemes.

If investors and fund managers are to recoup escalating losses and are to be included in the approaching steady succession of class action cases, both in US and Australian courts, now is the time to become actively involved in the filing and participation process.  However, keeping track of the opportunities to make a claim and the processes required to do so successfully, can be a complicated and daunting task – with many investors mistakenly be­lieving that the cost and time involved will outweigh the benefits. In fact, specialist services are now available to handle the class action participation process, often on a no-win, no-fee basis.

Stephen Everard, Managing Director, GOAL Group, comments, “It is the judgement of the legal profession that there is a clear duty of care for institutional investors to register claims on behalf of their clients. Our research shows that aside from fulfilling corporate governance responsibilities, there is also a substantial need for Australian superannuation funds to help plug the escalating pensions gap. An alarming proportion of class action settlements nevertheless remain unclaimed despite the recent proliferation of high-profile cases.

“Although the Sarbanes-Oxley Act in the US and the Corporate Law Economic Reform Program (CLERP 9) Act in Australia have suppressed the possibility of further Enrons, Worldcoms and Parmalats occuring, the international credit crisis is continuing to lead to a steady stream of class action lawsuits affecting superannuation fund investments, the resolution of which will take anywhere between five and seven years.  If recent cases such as the RBS class action which involves Dutch, U.K and several other non-US pension funds lead to resolution, then it is likely to see the largest settlement ever in the history of US securities litigation, with payouts eclipsing even the Enron case.

“With the financial markets crisis set to lead to a steady stream of smaller cases, the clear message is that all Australian superannuation funds should be taking immediate action in order to recoup escalating losses on an ongoing basis in order to ensure their beneficiaries’ interests are properly safeguarded in the future. It is true that participating in a class action requires timely and accurate information about the relative merits and procedural processes, and time and resources to review and evaluate relevant settle­ment provisions. Investors must then cross-reference these outputs against extensive individual trading activity data and com­pile and submit the often complex paperwork necessary to make a valid claim.

“But outsourced, specialist automated services are available on the market to process class action claims without incurring high expense, often granted on a no-win, no-fee basis. Those funds best placed to emerge from the downturn as winners will be those making the most of such services.”

Methodology

Publicly available data sources on class action settlements were combined with GOAL Group’s own proprietary datasets in order to quantify the levels of loss suffered by Australian public, corporate and industry superannuation funds and in order to determine how much was left unreclaimed through non participation in US securities class actions between 2007 and 2009.

GOAL Group stelt wel dat ca. e1,8 miljard van deze verliezen wordt terugbetaald aan Nederlandse pensioenfondsen die deelnemen aan (voornamelijk Amerikaanse) class action claims uit deze periode.

Als er niet meer pensioenfondsen aan de class actions deelnemen, zullen enkele pensioenfondsen hun rechten verliezen om ca. e450 miljoen aan verhaalbare fondsen terug te krijgen. Die worden dan verdeeld over de deelnemers aan de betreffende claim.

Een alarmsignaal dus voor de Nederlandse pensioenfondsen die momenteel geen gebruik maken van het recht om schadevergoeding te claimen via de Amerikaanse rechtbanken. Door de financiële crisis die een instorting van de subprime hypotheekmarkt veroorzaakte, en door de Madoff-zwendel, zijn pensioenfondsen zich gelukkig veel meer bewust van class actions.

Sommige commentatoren vermoeden dan ook dat er nu veel meer houdbare rechtszaken zullen volgen, ook al zijn de toegewezen bedragen als gevolg van de financiële crisis veel lager. De Wet Collectieve Afwikkeling Massaschade (WCAM) breidde tevens het geografische potentieel van class action claims uit en baande hiermee een weg voor Europese rechtszaken. Shell werd in juni 2009 het eerste Europese ‘slachtoffer’ en werd door het Gerechtshof in Amsterdam veroordeeld tot een betaling van $450 miljoen ter compensatie voor foute financiële verklaringen in de periode 1997-2003 betreffende de olie- en gasreserves en de grote financiële gevolgen daarvan.

Beleggers en fondsmanagers, die hun groeiende verliezen willen terugvorderen en deel uitmaken van het steeds grotere aantal class action claimprocedures, moeten hun indienings- en deelnameproces nu starten. Ze kunnen hiervoor gebruikmaken van gespecialiseerde dienstverleners die de afhandeling van het deelnameproces voor een class action claimprocedure verzorgen. Vaak gebeurt dit op een no win, no fee basis.

Source: Ruud Van De Locht, Nederlands Pensioen & Beleggingsnieuws | Published: February 2010

The group claimed that a recent study has revealed that between 2007 and 2009 the reluctance to engage in class actions has resulted in some $3.5 billion being “left on the table”. $1.8 billion of this could have gone to Australian corporate and industry funds, and $1.7 billion to Australian public sector funds.

The report claimed that more than $110 billion was lost by Australian superannuation funds on their investments in 2007-2009, something that should act as a wake-up call for funds that are neglecting their right to claim damages in the US.

The London-based group claimed there was a substantial opportunity for superannuation funds to continue to reduce the pensions gap through class actions.

Source: Mike Taylor, MoneyManagement.com.au | Published: 09 March 2010

De kredietcrisis bracht een nieuwe golf schadeclaims op gang. Esther Gotink schrijft over de kansen en valkuilen van procederen

Voor OPG was het een lichtpuntje na donkere beleggingsdagen: het farmaceutische pensioenfonds kreeg een deel van de schade vergoed die het had geleden door het Lehman-faillissement. De rechtbank in Amsterdam stelde het fonds in het gelijk in een zaak tegen zijn Amerikaanse vermogensbeheerder State Street, waarna in de VS een schikking werd getroffen.

Schadeclaims zijn in Amerika al jarenlang gemeengoed maar in Europa is het een nog tamelijk nieuw fenomeen. De subprime crisis heeft ertoe geleid dat steeds meer institutionele beleggers deze methode aanwenden om de geleden beleggingspijn te verzachten.

Zaken worden individueel gevoerd, zoals OPG deed, of in een class action (collectieve procedure). Europa kent geen massaschadebeleid zoals in Amerika, dus moet telkens opnieuw worden gezocht naar de beste manier om te procederen tegen organisaties na frauduleus handelen of wanbeleid.

“Een aantal beleggers is sinds de kredietcrisis druk bezig om de balans op te maken, en gaat na of verliezen te verhalen zijn”, zegt Robert Lobo, consultant op het gebied van onder andere tax reclaim en class actions bij het bedrijf Mylette. “In Amerika is er altijd wel een legertje advocaten dat zegt: weet je wat, dat ga ik voor je uitzoeken. Dat kan resulteren in een massaclaim. Als er dan schade wordt uitgekeerd, wil de advocaat een deel van de koek.”

Critici zeggen dat class actions de rechtbanken dichtslibben; supporters menen dat het good governance stimuleert. “Class actions hebben een corrigerende functie”, zegt Kris Douma die binnen MN Services de aandeelhoudersrechten van zo’n 2000 bedrijven beheert. “Aan de ene kant probeer je de financiële schade te repareren. Aan de andere kant vertel je de markt dat frauduleuze handelingen niet door de beugel kunnen.”

Volgens Goal, een Britse specialist in schadevorderingen, zijn Nederlandse pensioenfondsen te laks in procederen: ze lieten tussen 2006 en 2007 voor liefst e450 miljoen aan ongeclaimde tegoeden liggen. Goal spreekt van een ‘alarmfase’ voor de Nederlandse pensioensector omdat gelden die de dekkingsgraad kunnen verlichten worden genegeerd.
“Een fonds gaat niet voor vijf- of tienduizend euro procederen, maar als een class action loopt, kun je eenvoudig aanhaken”, zegt Ton Coemans, die als senior legal counsel de schadeclaims van ABP initieert. “Neem de Ahold-zaak. Iedereen die aandelen in Ahold had, kreeg van zijn bank op een gegeven moment een formulier. Kwestie van invullen en je doet mee.” Een class action kan vier, vijf jaar lopen, onderstreept Coemans. “Je moet er voor zorgen dat je de procedure in de gaten houdt en niet de boot mist als tot schade-uitkering wordt overgegaan.”

Hij noemt het monitoren van en deelnemen aan collectieve claims een fiduciaire verantwoordelijkheid van pensioenfondsen. “Kleinere fondsen zullen een kosten/batenafweging moeten maken, maar excuses als imagoschade of ‘dit past niet bij ons’ gaan niet op. Ze hebben de plicht naar hun deelnemers om schade te herstellen. Vaak vergt dat niet veel. Menig fonds brengt zijn assets onder bij custodians die class actions volgen. Een simpele afspraak met je custodian kan al veel werk binnen je fonds wegnemen.”

Lobo vraagt zich af of pensioenfondsen voldoende worden ingelicht door hun custodians. “Je moet er de Service Level Agreement met je custodian op nakijken: moet je voor elke dienst apart betalen of is het all inclusive? Iedere duizend euro die terugkomt naar de pensioenkas is ten gunste van de pensioengerechtigde of de nu premiebetalende.”

De ervaring van Bernard Verbunt, advocaat  bij Simmons & Simmons, is dat pensioenfondsen zich ‘absoluut niet de kaas van het brood laten eten’. Verbunt vertegenwoordigt pensioenfondsen PMA en BAT, die evenals OPG tegen State Street procederen. “Je krijgt van tevoren nooit 100% zekerheid dat je een procedure gaat winnen, maar als er een reële kans op succes is, laat een pensioenfonds die niet lopen. Wel is het zo dat door liquidaties als die van DSB en Icesave allerlei claimgroepen uit de grond schieten waarmee pensioenfondsen zich niet automatisch willen associëren.”

Coemans adviseert fondsen om een goed raamwerk te ontwerpen. “Het bestuur moet kunnen aantonen óf ze iets doen met schadeclaims en wát ze dan doen. Deze transparantie naar de deelnemers en toezichthouders is erg belangrijk. Bovendien is het nodig dat iemand binnen het fonds zich rekenschap geeft van het feit dat claimformulieren kunnen binnenkomen en dat daar actie op moet worden genomen. Dat vergt een bepaalde infrastructuur.”

Fondsen moeten voor zichzelf bepalen wanneer het beter is om over te gaan tot een individuele rechtszaak. Coemans: “Als gevolg van de kredietcrisis zijn meerdere financiële instellingen flink onder vuur genomen. Grote zaken waarbij ABP een eigen procedure is begonnen, zijn Wachovia en Merck. Als echt sprake is van substantiële verliezen overwegen we een eigen actie te starten.”

ABP hanteert een financiële grens voordat ze op eigen conto aan de juridische bel trekt. “We hebben een beleid in securities litigation, ofwel het voeren van aandeelhoudersclaims, dat op dit moment wordt herzien. Als we de daarin vastgestelde financiële grens overschrijden, is dat voor ons een signaal om dieper in een zaak te duiken en te bezien of deelname aan een class verstandig is danwel een eigen procedure te starten.”

Het pensioenfonds maakt sinds 2004 gebruik van een service provider die op dagbasis Amerikaanse databanken afstruint om te kijken of er nieuwe class actions zijn. “Toen we met dat systeem begonnen, was onze insteek om op een zo efficiënt mogelijke manier zoveel mogelijk schade vergoed te krijgen”, vertelt Coemans. “Maar je merkt dat de tijden veranderen; je ziet nu een ontwikkeling dat Amerikaanse rechters Europese investeerders er zoveel mogelijk van weerhouden in de VS te procederen. Europeanen worden daarmee gedwongen te kijken naar de juridische mogelijkheden op hun eigen continent.”

Het ambtenarenfonds ondervond dit aan den lijve, toen een massaclaim werd gestart tegen Shell nadat bleek dat de olie- en gasreserves schromelijk waren overdreven – het aandeel op de beurs kelderde daarna met liefst 8%. ABP begon de claim voor een schade van $150 miljoen. “We waren class member maar merkten dat er drempels werden opgeworpen. We besloten uit de class te stappen omdat de rechter onze deelname wellicht zou uitsluiten en we dan geconfronteerd werden met het verstrijken van de verjaringstermijn om te procederen.”

ABP besloot een eigen procedure te starten, en maakte gebruik van de net geopende mogelijkheid in Nederland om als groep te procederen: in 2005 werd de Wet Collectieve Afwikkeling Massaschade (WCAM) geïntroduceerd. Het Hof in Amsterdam heeft afgelopen mei een schikking tussen Shell en een stichting van benadeelden – de Nederlandse variant op een class – verbindend verklaard.

Volgens Douma loopt ons land voorop in de collectieve afwikkeling van schadeclaims in Europa. “Procederen buiten Amerika kan een grote uitdaging zijn. Het rechtssysteem in Europa is per land geregeld, en de vraag is wat we doen met al die Europese ondernemingen waar we als gevolg van boekhoud- of prospectusfraude verliezen hebben geleden.” Hij spreekt uit ervaring: zijn bedrijf wil namens klant PME procederen tegen de Royal Bank of Scotland (RBS). “We waren bereid als hoofdaanklager op te treden in een Amerikaanse class, maar de rechter wees een andere advocaat toe. We betwijfelden of die zich hard zou maken voor een Europese achterban, bovendien heeft de betreffende rechter de reputatie zoveel mogelijk Europeanen uit te sluiten.”

Evenals ABP in Shell koos ook MN Services er vanwege het verjaringsrisico voor de procedure niet af te wachten, en probeert ze nu samen met twee Britse pensioenfondsen te procederen via de High Court in Londen. In deze stad staat het hoofdkantoor van RBS. Het kan een testcasus worden in de Britse rechtspraak, die vooralsnog geen plaats biedt aan class actions. “Veel financiële hoofdkantoren zitten in Londen, dus een Britse wetswijziging zou het aandeelhoudersactivisme een enorme boost geven.”

Vestzak-broekzak theorie

Sommige pensioenfondsen zijn in de veronderstelling dat deelnemen aan een class action neerkomt op ‘snijden in het eigen vlees’. Het zijn tenslotte de huidige aandeelhouders die het gelag betalen voor de claimende partijen. Volgens Kris Douma, hoofd verantwoord beleggen en actief aandeelhouderschap bij MN Services, is deze vestzak-broekzak theorie onjuist. “Gedacht wordt dat de schikking van een bedrijf leidt tot een lager dividend, en dat een fonds dat kan voorkomen door niet mee te liften in de schikking. De realiteit is dat de verliezen die niet worden opgeëist, over de andere gedupeerden worden verdeeld terwijl de aandeelhouders die niet meedoen sowieso met de schade blijven zitten.” Class actions zijn niet meer weg te denken uit het globale pensioenlandschap, aldus Douma. “Het is dus onterecht te redeneren dat ze in aantal en omvang afnemen als jouw bestuur zich er afzijdig van houdt.”

Superannuation and asset managers in Australia had failed to claim a combined $3.5 billion in compensation from 2007 to 2009, said London-based Goal Group, a class action services specialist.

Of this total, $1.8bn belongs to corporate and industry superannuation funds, while $1.7bn belongs to public sector superannuation funds.

The report found that more than $110bn has been lost by Australian superannuation funds on their investments in this period, acting as a wake-up call to those now forgoing their legal right to claim damages through the US.

With the onset of the financial markets crisis — the collapse of the subprime mortgage market and the emergence of fraudulent Ponzi schemes — Australian superannuation funds’ awareness of class actions has risen significantly.

In addition, the subprime-related crisis has triggered a wave of class action lawsuits and Australian investors are likely to miss out on billions more in the coming years unless they take steps to recoup money, according to Goal Group managing director Stephen Everard.

Speaking after a round of meetings with Australian asset managers and regulators, Mr Everard said: “We’ve found that institutional investors in Australia, from large commercial retail master trusts to government sector funds that have been hard hit by their failure to take part in US securities class action litigation, are now very much aware.

“Several substantial investors have asked us for a detailed breakdown of how their portfolios may have missed out through lost opportunities to claim compensation that was rightfully theirs,” he said.

Investors typically need to register with a lead plaintiff or law firm filing a class action lawsuit, but Australian shareholders and their fund custodians have traditionally been averse to corporate confrontation or have shied away because of a perceived inability to track an often complicated claims process.

Mr Everard said institutional directors had a clear duty of care to register claims in US courts on behalf on their clients.

“Our research shows that non-participation is costing these investors dearly,” he said.

Mr Everard said that a downturn in filings in 2006 raised the possibility that shareholder class actions were on the wane.

“But we see interest in class actions as likely to expand further to failed investments in the US, specifically with funds being approached regarding their losses through investments in US Ponzi schemes.”

Last year, 32 class actions relating to subprime debt alone were filed in the US. These were mainly against mortgage companies and lenders.

“We can see 320 class actions around the world at the moment, of which 300 would be against US-based companies,” Mr Everard said.

Lawyers say the financial crisis will spawn hundreds of further class actions against institutions that have taken writedowns.

Source: Tim Blue, The Australian | Published: 22 February 2010

Nederlandse pensioenfondsen lopen wellicht honderden miljoenen euro`s mis als gevolg van de afwikkeling van diverse wereldwijde schadevorderingen. Daarbij gaat het om zogenaamde class action-procedures, waarmee een deel van de aanzienlijke beleggingsverliezen in de periode 2006-2008 moet worden teruggebracht.

Dat meent de Britse Goal Group, die gespecialiseerd is in collectieve schadevorderingen, op basis van zijn meest recente berekeningen. Nederlandse pensioenfondsen hebben volgens Goal in die jaren gezamenlijk circa 107 miljard euro verloren op hun beleggingen. Rechtszaken in voornamelijk de Verenigde Staten konden niet verhelpen dat daarvan slechts 1,8 miljard euro werd terugbetaald. `Als er niet meer pensioenfondsen aan de class actions deelnemen, zullen enkele fondsen hun rechten verliezen om circa 450 miljoen euro aan verhaalbare verliezen terug te krijgen, die vervolgens verdeeld zullen worden onder de deelnemers aan de betreffende claim`, meent Stephen Everard van Goal.

De Britten hebben volgens Robert Lobo van de namens Goal optredende Mylette Groep belang bij de oproep. `Zij hebben een database opgebouwd waar alle class actionprocedures ter wereld inzitten.`

AMSTERDAM – Nederlandse pensioenfondsen dreigen honderden miljoenen euro’s mis te lopen uit de afwikkeling van allerlei collectieve schadevorderingen wereldwijd.

Het gaat om zogeheten class action-procedures om een deel van de gigantische beleggingsverliezen in de periode 2006-2008 terug te krijgen. Pensioenfondsen die echter niet aan deze class actions meedoen, verliezen hun rechten om circa €450 miljoen aan verhaalbare schade terug te krijgen.

Dat stelt de Goal Group, een Britse specialist in collectieve schadevorderingen, op basis van haar jongste berekeningen. Volgens Goal hebben Nederlandse pensioenfondsen in de periode van 2006 tot en met 2008 gezamenlijk naar schatting €107 miljard verloren op hun beleggingen. Het bureau raamt dat hiervan ongeveer €1,8 miljard wordt terugbetaald, als gevolg van rechtszaken in met name de Verenigde Staten.

„Als er niet meer pensioenfondsen aan de class actions deelnemen, zullen enkele fondsen hun rechten verliezen om circa €450 miljoen aan verhaalbare verliezen terug te krijgen, die vervolgens verdeeld zullen worden onder de deelnemers aan de betreffende claim”, aldus Stephen Everard van Goal.

Hij spreekt van een „alarmsignaal voor de Nederlandse pensioenfondsen die momenteel geen gebruik maken van het recht om schadevergoeding te claimen via de Amerikaanse rechtbanken”, zonder daarbij in te gaan op concrete namen. De Vereniging van Bedrijfstakpensioenfondsen kon gisteren niet inhoudelijk reageren.

Het belang van de Britten bij hun oproep is duidelijk, erkent Robert Lobo van de Mylette Groep, die in Nederland optreedt namens Goal. „Zij hebben een database opgebouwd waar alle class actionprocedures ter wereld in zitten. Via een alert service kunnen zij pensioenfondsen en andere grote beleggers overal ter wereld op de hoogte houden hieromtrent. Neem bijvoorbeeld de recente World Online-procedure in ons land; daar moet je maar nét van weten als je als aandeelhouder aan de andere kant van de wereld zit”, aldus Lobo

Uitkering

„Als het vervolgens in één van die procedures tot uitkering komt, gaat een deel daarvan naar Goal”, zo legt hij het principe uit. „De hamvraag is ’weten pensioenfondsen dat ergens een class action-procedure loopt en worden zij eigenlijk wel geïnformeerd door hun custodians (gespecialiseerde partijen die aandelen fysiek voor beleggers bewaart en administreert zoals State Street en de Nederlandse Kas Bank, red.)”, zegt Lobo.

Goal houdt er rekening mee dat er – in verband met de dubieuze subprime-hypotheken en oplichters als Madoff – waarschijnlijk veel meer ’houdbare’ rechtszaken zullen komen. Wel zullen de toegewezen bedragen als gevolg van de financiële crisis een stuk lager liggen dan in het verleden, verwacht het Britse bureau.

Het bekendste voorbeeld van een collectieve schadeprocedure in ons land is die tegen Shell. In verband met de forse afwaardering van de oliereserves in 2004 zag de oliereus zich drie jaar later genoodzaakt $389 miljoen ter beschikking te stellen voor naar schatting enkele honderdduizenden gedupeerde beleggers buiten de VS. De uitbetaling hiervan begint naar verwachting medio 2011.

Daarnaast is sprake van een toenemend aantal zaken van boze klanten/beleggers tegen hun bank.

Dat meent de Britse Goal Group, die gespecialiseerd is in collectieve schadevorderingen, op basis van zijn meest recente berekeningen. Nederlandse pensioenfondsen hebben volgens Goal in die jaren gezamenlijk circa 107 miljard euro verloren op hun beleggingen. Rechtszaken in voornamelijk de Verenigde Staten konden niet verhelpen dat daarvan slechts 1,8 miljard euro werd terugbetaald. `Als er niet meer pensioenfondsen aan de class actions deelnemen, zullen enkele fondsen hun rechten verliezen om circa 450 miljoen euro aan verhaalbare verliezen terug te krijgen, die vervolgens verdeeld zullen worden onder de deelnemers aan de betreffende claim`, meent Stephen Everard van Goal.

De Britten hebben volgens Robert Lobo van de namens Goal optredende Mylette Groep belang bij de oproep. `Zij hebben een database opgebouwd waar alle class actionprocedures ter wereld inzitten.`

Het gaat om zogeheten class action-procedures om een deel van de gigantische beleggingsverliezen in de periode 2006-2008 terug te krijgen. Pensioenfondsen die echter niet aan deze class actions meedoen, verliezen hun rechten om circa €450 miljoen aan verhaalbare schade terug te krijgen.

Dat stelt de Goal Group, een Britse specialist in collectieve schadevorderingen, op basis van haar jongste berekeningen. Volgens Goal hebben Nederlandse pensioenfondsen in de periode van 2006 tot en met 2008 gezamenlijk naar schatting €107 miljard verloren op hun beleggingen. Het bureau raamt dat hiervan ongeveer €1,8 miljard wordt terugbetaald, als gevolg van rechtszaken in met name de Verenigde Staten.

„Als er niet meer pensioenfondsen aan de class actions deelnemen, zullen enkele fondsen hun rechten verliezen om circa €450 miljoen aan verhaalbare verliezen terug te krijgen, die vervolgens verdeeld zullen worden onder de deelnemers aan de betreffende claim”, aldus Stephen Everard van Goal.

Hij spreekt van een „alarmsignaal voor de Nederlandse pensioenfondsen die momenteel geen gebruik maken van het recht om schadevergoeding te claimen via de Amerikaanse rechtbanken”, zonder daarbij in te gaan op concrete namen. De Vereniging van Bedrijfstakpensioenfondsen kon gisteren niet inhoudelijk reageren.

Het belang van de Britten bij hun oproep is duidelijk, erkent Robert Lobo van de Mylette Groep, die in Nederland optreedt namens Goal. „Zij hebben een database opgebouwd waar alle class actionprocedures ter wereld in zitten. Via een alert service kunnen zij pensioenfondsen en andere grote beleggers overal ter wereld op de hoogte houden hieromtrent. Neem bijvoorbeeld de recente World Online-procedure in ons land; daar moet je maar nét van weten als je als aandeelhouder aan de andere kant van de wereld zit”, aldus Lobo

Uitkering

„Als het vervolgens in één van die procedures tot uitkering komt, gaat een deel daarvan naar Goal”, zo legt hij het principe uit. „De hamvraag is ’weten pensioenfondsen dat ergens een class action-procedure loopt en worden zij eigenlijk wel geïnformeerd door hun custodians (gespecialiseerde partijen die aandelen fysiek voor beleggers bewaart en administreert zoals State Street en de Nederlandse Kas Bank, red.)”, zegt Lobo.

Goal houdt er rekening mee dat er – in verband met de dubieuze subprime-hypotheken en oplichters als Madoff – waarschijnlijk veel meer ’houdbare’ rechtszaken zullen komen. Wel zullen de toegewezen bedragen als gevolg van de financiële crisis een stuk lager liggen dan in het verleden, verwacht het Britse bureau.

Het bekendste voorbeeld van een collectieve schadeprocedure in ons land is die tegen Shell. In verband met de forse afwaardering van de oliereserves in 2004 zag de oliereus zich drie jaar later genoodzaakt $389 miljoen ter beschikking te stellen voor naar schatting enkele honderdduizenden gedupeerde beleggers buiten de VS. De uitbetaling hiervan begint naar verwachting medio 2011.

Daarnaast is sprake van een toenemend aantal zaken van boze klanten/beleggers tegen hun bank.

Source: Pensioen Carriere | Published: 16 December 2009

Het gaat om zogeheten class action-procedures om een deel van de gigantische beleggingsverliezen in de periode 2006-2008 terug te krijgen. Pensioenfondsen die echter niet aan deze class actions meedoen, verliezen hun rechten om circa €450 miljoen aan verhaalbare schade terug te krijgen.

Dat stelt de Goal Group, een Britse specialist in collectieve schadevorderingen, op basis van haar jongste berekeningen. Volgens Goal hebben Nederlandse pensioenfondsen in de periode van 2006 tot en met 2008 gezamenlijk naar schatting €107 miljard verloren op hun beleggingen. Het bureau raamt dat hiervan ongeveer €1,8 miljard wordt terugbetaald, als gevolg van rechtszaken in met name de Verenigde Staten.

„Als er niet meer pensioenfondsen aan de class actions deelnemen, zullen enkele fondsen hun rechten verliezen om circa €450 miljoen aan verhaalbare verliezen terug te krijgen, die vervolgens verdeeld zullen worden onder de deelnemers aan de betreffende claim”, aldus Stephen Everard van Goal.

Hij spreekt van een „alarmsignaal voor de Nederlandse pensioenfondsen die momenteel geen gebruik maken van het recht om schadevergoeding te claimen via de Amerikaanse rechtbanken”, zonder daarbij in te gaan op concrete namen. De Vereniging van Bedrijfstakpensioenfondsen kon gisteren niet inhoudelijk reageren.

Het belang van de Britten bij hun oproep is duidelijk, erkent Robert Lobo van de Mylette Groep, die in Nederland optreedt namens Goal. „Zij hebben een database opgebouwd waar alle class actionprocedures ter wereld in zitten. Via een alert service kunnen zij pensioenfondsen en andere grote beleggers overal ter wereld op de hoogte houden hieromtrent. Neem bijvoorbeeld de recente World Online-procedure in ons land; daar moet je maar nét van weten als je als aandeelhouder aan de andere kant van de wereld zit”, aldus Lobo

Uitkering

„Als het vervolgens in één van die procedures tot uitkering komt, gaat een deel daarvan naar Goal”, zo legt hij het principe uit. „De hamvraag is ’weten pensioenfondsen dat ergens een class action-procedure loopt en worden zij eigenlijk wel geïnformeerd door hun custodians (gespecialiseerde partijen die aandelen fysiek voor beleggers bewaart en administreert zoals State Street en de Nederlandse Kas Bank, red.)”, zegt Lobo.

Goal houdt er rekening mee dat er – in verband met de dubieuze subprime-hypotheken en oplichters als Madoff – waarschijnlijk veel meer ’houdbare’ rechtszaken zullen komen. Wel zullen de toegewezen bedragen als gevolg van de financiële crisis een stuk lager liggen dan in het verleden, verwacht het Britse bureau.

Het bekendste voorbeeld van een collectieve schadeprocedure in ons land is die tegen Shell. In verband met de forse afwaardering van de oliereserves in 2004 zag de oliereus zich drie jaar later genoodzaakt $389 miljoen ter beschikking te stellen voor naar schatting enkele honderdduizenden gedupeerde beleggers buiten de VS. De uitbetaling hiervan begint naar verwachting medio 2011.

Daarnaast is sprake van een toenemend aantal zaken van boze klanten/beleggers tegen hun bank.

Source: Eufin Europees Financieel Netwerk | Published: 16 December  2009

However, the report also highlights that if class action participation rates do not improve, a number of pension funds will effectively forego their right to recoup some £125 million of recoverable funds, which will instead be distributed amongst only those who filed a claim.

According to GOAL Group, this is a wake-up call to the UK public sector pension funds that are currently missing out on their legal right to claim damages through the US courts – despite high profile cases such as North Yorkshire and Merseyside County Council pension funds applying for lead plaintiff status. With the onset of the financial markets crisis – the collapse of the subprimemortgage market and the emergence of fraudulent Ponzi schemes – the number of LA pension funds participating in class actions has risen significantly. However, a proportion of pension funds are still not involved.

For UK local authority pension funds, GOAL Group’s research shows that while almost £8.5bn was lost and £140 million open to be recovered between 2007 and 2008, this increased to £22.5bn lost and £370 million open to be recovered between 2008 and 2009.

West Midlands Pension Fund is one local authority that continues to play an active role in class action participation. Tony Doyle, Senior Investment Manager- Equities & Corporate Governance, West Midlands Pension Fund, comments, “We have been involved in numerous class actions over the years, varying in size, including A.T. & T. Wireless, Cable & Wireless, Federal Home Loan and Royal Ahold NV. We have recovered over $ 700,000 to date.
“The Fund has always supported good governance challenging companies that do not meet best practice. We perceive poor governance as a risk to a fund’s long-term financial interests. The Fund therefore submits class actions globally where it believes that it has suffered a financial loss through fraudulent or irresponsible corporate behaviour. Responsible investing is imperative in a financial downturn, and class action participation is just one element of the Fund’s approach to this.

“More than ever, all funds must proactively ensure that they are fulfilling their fiduciary duty to shareholders and should encourage corporate management to behave honestly and responsibly. Participating in shareholder litigation, where appropriate, is an effective tool and has returned over half a million dollars to the Fund to date. All local authority pension funds should consider protecting both their immediate and long-term interests.”

Stephen Everard, Managing Director, GOAL Group, comments, “It is the judgement of the legal profession that there is a clear duty of care for institutional investors to register claims on behalf of their clients. Our research shows that aside from fulfilling corporate governance responsibilities, there is also a growing need for local authorities to plug the escalating pensions gap. High-profile cases have helped flag up the benefits of class actions but an alarming proportion nevertheless continues to remain unclaimed.

“Although the Sarbanes-Oxley Act and European equivalents have suppressed the possibility of further Enrons and Parmalats occuring, the international credit crisis continues to lead to a surge of class action lawsuits affecting local authority pension fund investments, the resolution of which will take anywhere between five and seven years. If recent cases such as the RBS class action lead to resolution, then it is likely to see the largest settlement ever in the history of US securities litigation, with payouts eclipsing even the Enron case.

“With the financial markets crisis set to lead to a steady stream of smaller cases, the clear message is that all local authorities should be taking immediate action in order to recoup escalating losses on a permanent basis in order to ensure their beneficiaries’ interests are properly safeguarded in the future. It is true that participating in a class actions requires timely and accurate information about the relative merits and procedural processes, and time and resources to review and evaluate relevant settle¬ment provisions. Investors must then cross-reference these outputs against extensive individual trading activity data and com pile and submit the often complex paperwork necessary to make a valid claim.

“But outsourced, specialist automated services are available on the market to process class action claims without incurring high expense, often granted on a no-win, no-fee basis. Those funds best placed to come out the other side of the downturn will be those making the most of such services.”

Source: Global Custodian | Published: 25 November 2009

Good news, then, for litigious investors. The US allows “no win, no fee” arrangements and lots of poking around pre-trial. It also, through the assembly of class action lawsuits, offers potential for much larger pay-outs. But greater access for foreigners to the American court system could prove expensive and time-consuming for global companies. They are already seeing more lawsuits brought against them on US soil, though true F-cubed cases remain rare.

The new legislation would establish that cases can be heard in US courts provided “significant steps” towards a violation occurred within the US, even where the securities transaction and its investors are abroad. That would codify a single standard, whereas courts have previously had varying opinions on whether to hear F-cubed cases. Moreover, it would arguably set a lower standard than that established by the influential Second Circuit Court of Appeals, which in 2008 held that jurisdiction depended on the location of the “heart of the alleged fraud”.

The sheer volume of proposed legislation overhauling US financial regulation means significant changes could slip through largely unnoticed – especially where there is no natural political constituency to argue the case and with so many higher-profile fights to pick. True, courts would have to interpret any new standard. But “significant steps” towards an alleged fraud could encompass all manner of US-based advisers and subsidiaries. No wonder the European Commission has apparently already signalled its alarm. For rapacious US plaintiffs’ attorneys, a change would be just another reason to try their luck.

The Group’s projections show that around £500million of these losses will be recovered by UK local authorities which choose to participate in class action lawsuits arising from that period, mainly based in the US. However, if rates of class actions do not improve, a number of pension funds will effectively be ignoring their right to recoup around £125million of recoverable funds, which will be distributed between only those who filed a claim.

GOAL said this should be a wakeup call to the UK public sector, as they are currently missing out on their legal right to claim damages through the US courts, despite cases such as North Yorkshire and Merseyside County Council pension funds in their applications for lead plaintiff statuses.

Between 2007 and 2008, almost £8.5bn was lost and £140million open to be recovered for UK local authority pension funds, and this increased to £22.5bn lost and £370million open to be recovered between 2008 and 2009.

“We have been involved in numerous class actions over the years, varying in size, including A.T. & T. Wireless, Cable & Wireless, Federal Home Loan and Royal Ahold NV,” commented Tony Doyle, senior investment manager – equities and corporate governance, West Midlands Pension Fund. “We have recovered over $700,000 to date.”

GOAL Group’s managing director, Stephen Everard, said: “It is the judgement of the legal profession that there is a clear duty of care for institutional investors to register claims on behalf of their clients. Our research shows that aside from fulfilling corporate governance responsibilities, there is also a growing need for local authorities to plug the escalating pensions gap. High-profile cases have helped flag up the benefits of class actions but an alarming proportion nevertheless continues to remain unclaimed.”

Everard added that the clear message to local authorities should be to take immediate action in order to recoup escalating losses on a permanent basis to “ensure their beneficiaries’ interests are properly safeguarded in the future”.

Source: Sophie Baker, Pensions Age | Published: 10 November 2009

Executive Director Saghar Bigwood said “This membership is an integral part of our development strategy and will primarily facilitate the growth of Goal Taxback via the creation of a Tax Reclaim Service Bureau utilizing SWIFT’s global structured messaging capabilities and network.”

Saghar Bigwood, Executive Director, states that achieving this accreditation is testament to the continuous evolution of our services and the dedication and professionalism of our entire team. Our leading-edge technology enables our clients to maximise their rightful returns from withholding tax and class actions around the globe.

The firm, which provides specialist class action services, calculated that between 2007 and 2008 UK local authority pension schemes lost almost £8.5bn on their investments, of which around £140m could be recovered through legal action.

Between 2008 and 2009, however, it revealed the losses by UK local government pension schemes (LGPS) increased to £22.5bn while the potentially recoverable funds from class actions more than doubled to £370m, because the financial crisis is likely to create a “far more sustainable stream of cases, albeit at less inflated settlement values”.

In total, this means LGPS’ lost around £31bn between 2007 and 2009 but have the potential to recover £500m. Goal Group claims, however, that £125m, or 25% of potentially recoverable funds, could be left unclaimed if local authorities do not start to increase their participation in legal actions.

Goal Group quoted statistics from Nera Economic Consulting stating the number of federal class action filings in US courts, the main location for these cases, peaked at 258 in 2008. This was the highest level since 2002, but the report noted the first half of 2009 has already seen 127 cases filed, of which 67% named at least one financial company as the primary or co-defendant.

Source: LegalNewsPost.com | Published: 16 October 2009

The firm also estimates that local government pension schemes (LGPS) in the U.K. lost around £31bn between 2007 and 2009 but have the potential to recover £500m through settlements. If local authorities do not start to increase their participation in such settlements, however, as much as 25% of this £500m could go unclaimed.

Source: Securities Docket | Published: 13 October 2009

A study found that between 2007 and 2009, £510m out of a total of £31bn losses on their investments during that period were recovered by UK council pension funds following class action lawsuits against companies through US courts, on the grounds of poor governance.

But it warns that a further £125m will not be recovered because of apathy by local authority funds.
The study, by class action company the Goal Group, said it was a ‘wake-up call to the UK public sector pension funds that are currently missing out on their legal right to claim damages through the US courts’.

The credit crisis, including the collapse of the sub-prime mortgages market and fraudulent schemes, has caused an increase in the number of local government pension funds seeking damages from companies and auditors. Lawsuits can take up to seven years to be resolved. In the case of UK council pension funds, Goal says that while £140m was due to be recovered between 2007/08, the figure rose to £370m in 2008/9.

Stephen Everard, its managing director, said: ‘High-profile cases have helped flag-up the benefits of class actions, but an alarming proportion, nevertheless, continues to remain unclaimed.’

The warning was backed by one local authority fund, West Midlands Pension Fund, which has pursued several class actions against firms in the US. Tony Doyle, its investment manager, equities and corporate governance, said: ‘We perceive poor governance as a risk to a fund’s long-term financial interests.

‘We, therefore, submit class actions globally, where we believe we have suffered a financial loss through fraudulent or irresponsible corporate behaviour.’ He added: ‘We have been involved in numerous class actions over the years, and have recovered more than $700,000 to date.’ Goal Group.

Source: Michael Burton, The MJ / LocalGov.co.uk | Published: 12 October 2009

UK local authorities could recover millions of pounds lost on pension investments in the past two years if they take part in US class action lawsuits.

About £500m (€546m, $794m) of these losses could be recouped, according to a study by Goal Group, a class action services specialist. But some local authorities are still not bothering to claim damages for cases relating to mismanagement. 

“A number of pension funds are missing out on their legal right to claim damages of about £125m, throwing away an opportunity to regain pension money that belongs to local authority employees,” said Stephen Everard, managing director.

“This is a wake-up call to public sector pension funds to participate,” he added.

He estimates about 25-30 per cent of country councils are not making claims and attributes this to “apathy, understaffing and underfunding”. From the beginning of 2007 to date, the value of local authority pension fund portfolios have declined by £31bn, the study showed. 

West Midlands Pension Fund said it had recovered over $700,000 through claims over a number of years, including against Federal Home Loan and Royal Ahold.

Source: FT Adviser | Published: 12 October 2009

Goal Group managing director Stephen Everard claimed £500m of local government scheme losses between 2007 and 2009 would be recovered by funds participating in class action lawsuits.

But he said between 25% and 30% of local authority schemes were not participating in these actions – meaning £125m of the recovered money could be left unclaimed.

He said: “There’s a recognition that something needs to be done…but there’re always other priorities. It’s also viewed as very complicated, when in fact it isn’t.”

Everard said participation has “increased marginally” since Goal Group began its research two years ago.

The West Midlands Pension Fund has been an active participant in class action suits and has already recovered $700,000 (£439,000).

WMPF senior investment manager for equities and corporate governance said Tony Doyle said: “We have been involved in numerous class actions over the years, varying in size, including A.T. & T. Wireless, Cable & Wireless, Federal Home Loan and Royal Ahold NV.

“The fund has always supported good governance challenging companies that do not meet best practice. We perceive poor governance as a risk to a fund’s long-term financial interests. The fund therefore submits class actions globally where it believes that it has suffered a financial loss through fraudulent or irresponsible corporate behaviour.”

Source: Raquel Pichardo-Allison, Global Pensions | Published: 09 October 2009

The firm, which provides specialist class action services, calculated that between 2007 and 2008 UK local authority pension schemes lost almost £8.5bn on their investments, of which around £140m could be recovered through legal action.

Between 2008 and 2009, however, it revealed the losses by UK local government pension schemes (LGPS) increased to £22.5bn while the potentially recoverable funds from class actions more than doubled to £370m, because the financial crisis is likely to create a “far more sustainable stream of cases, albeit at less inflated settlement values”.

In total, this means LGPS’ lost around £31bn between 2007 and 2009 but have the potential to recover £500m. Goal Group claims, however, that £125m, or 25% of potentially recoverable funds, could be left unclaimed if local authorities do not start to increase their participation in legal actions.

Goal Group quoted statistics from Nera Economic Consulting stating the number of federal class action filings in US courts, the main location for these cases, peaked at 258 in 2008. This was the highest level since 2002, but the report noted the first half of 2009 has already seen 127 cases filed, of which 67% named at least one financial company as the primary or co-defendant.

Tony Doyle, senior investment manager for equities and corporate governance at the £6bn (€6.5bn) West Midlands Pension Fund, said it had been involved in class actions against numerous companies including AT&T Wireless, Cable & Wireless, Federal Home Loan and Royal Ahold NV.

As a result, Doyle confirmed, the West Midlands pension fund had recovered more than $700,000 (€478,834) from the litigation process.

“The fund submits class actions globally where it believes that it has suffered a financial loss through fraudulent or irresponsible corporate behaviour,” he said. “Responsible investing is imperative in a financial downturn, and class action participation is just one element of the fund’s approach to this.”

In addition, Doyle argued funds must proactively ensure they are fulfilling their “fiduciary duty to shareholders” by encouraging honest and responsible behaviour by corporate management.

“Participating in shareholder litigation, where appropriate, is an effective tool and has returned over half a million dollars to the fund to date. All local authority pension funds should consider protecting both their immediate and long-term interests,” he added.

Stephen Everard, managing director of Goal Group, claimed the research also showed a growing need for local authority pension schemes to plug the pensions gap, and suggested if recent cases such as the RBS class action – in which Merseyside and North Yorkshire pension funds are involved – lead to a resolution “it is likely to see the largest settlement ever in the history of US securities litigation”. (See earlier IPE article: US pension funds selected to lead RBS action)

Everard added: “With the financial markets crisis set to lead to a steady stream of smaller cases, the clear message is that all local authorities should be taking immediate action in order to ensure their beneficiaries’ interests are properly safeguarded in the future.”

Source: Nyree Stewart, Investment & Pensions Europe | Published: 09 October 2009

The GOAL group of companies says £500m is forecast to be recovered by UK funds through so-called class action law suits, mainly in the US, where claimants club together to recover money from institutions who have acted unlawfully.

But if participation rates in the specialised law suits do not improve, around £125m of recoverable funds could be left on the table.

A GOAL statement said: “This is a wake-up call to the UK public sector pension funds that are currently missing out on their legal right to claim damages through the US courts.”

With the onset of the financial markets crisis – the collapse of the sub-prime mortgage market and the emergence of fraudulent Ponzi schemes – the number of local authority pension funds participating in class actions has risen significantly, the group said. However, a proportion of pension funds are still not involved.

West Midlands Pension Fund is one local authority scheme that continues to play an active role in class actions.

Senior investment manager, Tony Doyle, said: “We have been involved in numerous class actions over the years, varying in size, including A.T. & T. Wireless, Cable & Wireless, Federal Home Loan and Royal Ahold NV. We have recovered over $700,000 to date.”

Source: James Illman, Local Government Chronicle | Published: 08 October 2009

Goal Group managing director Stephen Everard claimed £500m of local government scheme losses between 2007 and 2009 would be recovered by funds participating in class actions.

But he said between 25% and 30% of local authority schemes were not participating in these actions – meaning £125m of the recovered money could be left unclaimed.

He said: “There’s a recognition that something needs to be done…but there’re always other priorities. It’s also viewed as very complicated, when in fact it isn’t.”

Everard said participation has “increased marginally” since Goal Group began its research two years ago.

The West Midlands Pension Fund has been an active participant in class action suits and has already recovered $700,000 (£439,000).

WMPF senior investment manager for equities and corporate governance said Tony Doyle said: “We have been involved in numerous class actions over the years, varying in size, including A.T. & T. Wireless, Cable & Wireless, Federal Home Loan and Royal Ahold NV.

“The fund has always supported good governance challenging companies that do not meet best practice. We perceive poor governance as a risk to a fund’s long-term financial interests. The fund therefore submits class actions globally where it believes that it has suffered a financial loss through fraudulent or irresponsible corporate behaviour.”

Source: Raquel Pichardo-Allison, Professional Pensions | Published: 08 October 2009

Fears of another major investment bank default have been receding for the last few months, but the activity for investors of all hues to disentangle themselves from some
of the beleaguered remaining institutions has increased. In the post mortem of the market crash and government bailouts, more investors are seeing yesterday’s losses as tomorrow’s potential compensation, and the emerging global phenomenon of class actions – a single lawsuit made by multiple claimants against the same entity – has seized headlines.

A class action, otherwise known as ‘representative action’, is a lawsuit in which a large group of investors or consumers collectively bring a claim to a court based on common injury over a certain time period. In the US, one of the world leaders for this type of litigation, class actions are overseen by the Federal Rules of Civil Procedure Rule 23 and 28. A suit is typically filed with a named ‘lead plaintiff ’ or multiple plaintiffs, to represent a ‘class’.

There are two types of action, explains Stephen Everard, managing partner at GOAL group, a class action specialist law firm. “You can do a class action where you go to court, as with the US system, and the judge decides there’s a case to answer. Then it would follow the usual pattern of the forensic accountants to work out the losses suffered by investors – to see if the company had made full disclosure, where the share price would have been versus where it was, using peer index, daily inflation tables, a whole raft of factors.” Sufficient damages and losses incurred from the first day the company should have disclosed through its did finally get round to disclosing would then be calculated.

“The alternative is that a group of shareholders get together, normally brought together by one of the specialist law firms, and form a foundation and take a direct action.”

Everard explains that a foundation approach benefits the defendant in the sense that the company can agree and negotiate on a settlement. “If it goes to court, that number is largely out of their hands.”

GOAL Group conducts detailed research to identify where a company’ share price might have been artificially raised on the back of fraud of lack of full company disclosure, as compared to an index of its peer group. On page 14, a chart displays the case of Enron, the energy group accused of fraud in 2001 due to years of mismanaged accounting and insider trading.

As with defaulting banks, specific class action cases have come to represent wider, encapsulating issues. Where Lehman Brothers and its collapse defined the perils
of sub-prime mortgage trading, Enron and the lawsuit against Royal Dutch Shell, the oil group, has summed up the ubiquitous talk of company opacity and responsible
governance.

On 29th May, the Amsterdam Court of Appeals approved issued a binding declaration ordering Royal Dutch Shell to begin payment of USD381 million to a foundation made up of more than 150 institutional investors from 17 European countries, plus Canada and Australia. It includes USD352.6 million in cash paid from Shell and an expected payment to non-US shareholders out of a USD120 million fine Shell paid to the US Securities and Exchange Commission.

The action against Royal Dutch Shell relates to the company’s misrepresentations concerning details of its oil and gas reserves between 1999 and early 2004. All non-US investors who
bought Shell shares during this period technically had a claim against the fi rm. A leaked email from Walter van der Vijver, then head of oil and gas exploration at the firm, to the chairman, bemoaning the need to lie about its reserves, sealed the case for a class action, and a suit was fi led in a US district court.

Two years later, the oil company sought settlement for the non-US investors, and the scene moved to the Netherlands. The foundation structure of the combined claimants – which lawyers say is easier to facilitate out of court settlements – is slightly different to a class action. Dutch law does not allow aggrieved individuals to petition the court for a class-wide settlement.

Nevertheless, it was a situation whereby institutional investors smelled blood from a company and sought recompense.

An increasing number of countries have been amending laws to facilitate class actions, which have been credited with improving the efficiency of cases and reducing legal costs. On 1st June the Securities and Exchange Board of India (Sebi) decided to pledge financial aid to collective lawsuits, leading to expectation of more cases that seek to take advantage.
The regulator has restricted the funds to 25 Sebi investor associations and requires the collective claimants to prove that each case has affected more than 1,000 investors. Further, the Sebi funding will not exceed three-quarters of the total costs of the case.

The decision follows an increased awareness and culture change towards investor compensation, a stark sign of the times from a country that has traditionally disincitivised such lawsuits. Australia, too, has seen an increase in corporate class action, spurred by strong legislation against misleading and deceptive conduct. In the UK, the inability to fi le class actions has produced the unorthodox situation in which UK investors can sue a UK company in a US court. Most recently and pertinently this year, two pension funds – based in Merseyside and North Yorkshire – filed a class action against Royal Bank of Scotland.

Like the Royal Dutch Shell, the funds claimed the bank had withheld information concerning the state of its finances prior to its nationalisation by the UK government in November 2008. Four months previously, the bank had undertaken a rights issue, raising GBP12 billion to shore up its balance sheet, the first of the UK banks during that period to do so, before accepting a GBP20 billion rescue by the government.

Stephen Everard explains that case meets the criteria for a US based case. “You typically need to have a place of business in the US, which the bank has; your shares need to be tradeable in the US too,” he says. Everard adds that if the case is successful it will have ramifications for further lawsuits against British banks, including Lloyds TSB and Northern Rock, two banks part- and fully-owned respectively by the UK government.

“Although we don’t have class action legislation [in the UK] in cases against Lloyds TSB, Northern Rock, you’d be effectively be suing the government. That would be interesting.”

The lawsuit ran parallel with another UK pension fund seeking compensation in the US, when the GBP1 billion Avon Pension Fund was appointed “lead plaintiff” — the institution fronting a group lawsuit on behalf of others, including the North Yorkshire Pension Fund — in a case against GlaxoSmithKline, the drugs giant on grounds of deceit and fraud.

Despite this precedent, Everard and researchers at GOAL Group are also well aware that the UK should not expect a stampede of institutional investors seeking compensation any time soon. A recent report from the firm found that UK local pension authorities lost out on around GBP200 million from unclaimed compensation between 2000 and 2007. The report summarises that the emphasis of class action suits has shifted in the last two years from corporate governance scandals such as Enron – the US energy group whose accounting fraud led to multi-billion dollar settlements since its bankruptcy in 2001 – to losses related to the sub-prime mortgage lending fallout.

Though Everard says there has been an increase in claims overall, organising and filing class actions among UK institutions is still far from automatic. Inertia and a lack of understanding have been two critical reasons.

“There is a huge inertia, even to this day,” he says. “We do quite a lot of work for local government authorities, like West Midlands, and they’ve been very vocal and supportive to say they’ve received over USD500,000 in compensation for their fund. That’s a big fund, around GBP7-plus billion. I try to work with lots of other local authorities and they will recognise yes, we need to do class actions, yes, we know we should be doing more, we think our custodian does it but we’re not sure, or ‘we’ll get round to it’. Some I’ve talked to
for about two years and they haven’t done anything.”

However, class action lawsuits are likely to increase as governments and the exchanges want to be perceived as pursuing good corporate governance: “If something goes wrong, they [investors want to] know there is the wherewithal to recoup losses.”

For the UK, others agree with Everard as to the state of inaction. David Paterson, head of corporate governance at the National Association of Pension Funds, sees little appetite for increased litigation. “It’s not to say they [pension funds] are not concerned about RBS and the others, but the UK structure of governance – where a lot depends on an openness between companies and shareholders – is not a particularly good one to in which to have a litigation backdrop,” he says.

Paterson identifies additional problems to the pursuit of class actions and achieving a worthwhile settlement. Class actions often take a long time to get to court; when they do, the period of time in which the class action is seeking compensation may be a few years in the past. Many things could have happened or changed since then to affect the clarity of the claim.

“In the course of the five years since the fraud, the fund manager might have been changed, perhaps you’ve changed your custodian. There are quite a few things that make it a bit more difficult to launch a claim.”

He adds that pension funds also face a crucial cost-reward decision. “You’ve got to look at the potential value to the fund. We’re talking about small amounts of money sometimes; is it cost effective to pursue the claim?”

Everard echoes this concern, and reveals that only around 12% of the total loss within the class action period is typically recovered. But there are success stories out there, and GOAL Group has helped the West Midlands Pension Fund to recover around USD500,000. The fund, in turn, has been a vocal supporter of the class action process

Pension funds must keep up to speed with the relevant bodies responsible for identifying claims on their behalf. This can be a mixture of the fund’s custodian and external law firms. Bedford Pension Fund, for example, uses Northern Trust and the US-based law firm Barrack, Rodos & Bacine to monitor developments. Geoff Reader, head of pension fund management at the fund, revealed to ISJ that the organisation has 11 outstanding cases seeking cash reimbursement.

“Claims have been just on the back of our holdings,” he says. “So a manager has bought stock X and then that’s gone down in value – then more information comes into the public domain that questions it should have been sold at a different price. That forms the basis of the class action.”

He adds that domestic lawyers would be understandably keen for UK laws to change so they could “get a piece of the pie”. Reader has reservations, however, as to the overall benefits of increased class actions, particularly during more fragile economic circumstances. “There’s only a certain amount of money in the world; if you take money away from companies for class actions – which affects shareholders – then personally, I’m not convinced that ultimately it might not be the best solution for the whole economy. So it may not be the best thing for everybody to be doing.”

Everard at GOAL Group says: “Class actions is becoming a global phenomenon, not just the US. If the UK government doesn’t put it in then people will have to go through direct action through foundation.

If the government doesn’t allow class action legislation, then it doesn’t give the shareholders a lot of choice. There’s only one route to take, so they will try to drive a direct action, a one-to-one or one-to-many arrangement.”

Source: Ben Roberts, Investor Services Journal | Published: 11 August 2009

About £500m (€546m, $794m) of these losses could be recouped, according to a study by Goal Group, a class action services specialist. But some local authorities are still not bothering to claim damages for cases relating to mismanagement.

“A number of pension funds are missing out on their legal right to claim damages of about £125m, throwing away an opportunity to regain pension money that belongs to local authority employees,” said Stephen Everard, managing director. “This is a wake-up call to public sector pension funds to participate,” he added.

He estimates about 25-30 per cent of country councils are not making claims and attributes this to “apathy, understaffing and underfunding”. From the beginning of 2007 to date, the value of local authority pension fund portfolios have declined by £31bn, the study showed.

West Midlands Pension Fund said it had recovered over $700,000 through claims over a number of years, including against Federal Home Loan and Royal Ahold.

Source: Financial Times | Published: 4 October 2009

Securities class action litigation may be instituted on behalf of shareholders (the ‘class’) who have suffered an economic loss arising from a violation of the securities laws.  Most securities class actions have historically been filed in the US, but with the introduction of legislation to support strong corporate governance, such lawsuits are spreading across Europe, Australia and Asia.

Financial institutions are increasingly paying closer attention to developments related to securities class action litigation.  Yet, for a variety of reasons, global institutional investors do not always submit claim forms in situations where they may be eligible for recovery.  One reason may be that investors are not aware that a judgement has been entered or that a lawsuit has been settled or even filed.  According to research conducted by Goal, between 2000 and 2007 more than US $12 billion in settlement compensation awarded by the courts was unclaimed in class actions, bankruptcies and disgorgements.  To date, Goal has helped its clients recover over US $280 million in compensation.

Information from Interactive Data’s class actions service, which has been helping financial institutions track, monitor and recover funds emanating from securities class action litigation since 2005, has now been incorporated into Goal’s fully-outsourced solution designed to help clients manage and navigate the securities class action process and recoup funds where applicable.  This information includes details of securities class action litigation filed, with critical dates and data, and the relevant security identifiers – all in standard ISO 15022 format.

Using its ISO 9001 accredited technology, Goal undertakes research, analysis and calculations on behalf of clients, and completes any applicable claim documentation.  This is then emailed to the client, clearly indicating any additional information required from the client prior to filing with the court or other governmental agency overseeing the class action.  Goal’s solution allows clients to access an online reporting facility that provides the security identifier, together with the class period, settlement fund and any applicable proof of claim deadline.  Also available are a current case settlement diary that provides an overview of impending cases and an activity statement with information on the status of ongoing and collected claims.

Anthony Neville, European divisional director, Interactive Data, commented: “Class actions provide potential redress to investors who have suffered loss as a result of violations of the securities laws – and these actions have been increasing with the market turmoil.  Finding a system that is capable of compiling and disseminating class action information is critical.  We have been collecting and distributing corporate actions data to the financial industry for more than 20 years and have used this expertise, along with the relationships cultivated with major claims administrators and plaintiffs’ counsel, to provide a comprehensive class actions data service.”

Stephen Everard, managing director of Goal, added: “Our cutting-edge, highly-automated technology eliminates manual processes, which helps to reduce operational risk and create virtual straight-through processing – from the capture and scanning of client data through to the completion of the claim documentation.  Our clients worldwide include corporate pension funds, local government agencies, global custodians, prime brokerage houses, asset managers, investment banks and fund managers.”

-ENDS-

About Interactive Data Corporation

Interactive Data Corporation (NYSE: IDC) is a leading global provider of financial market data, analytics and related solutions to financial institutions, active traders and individual investors. The Company’s businesses supply real-time market data, time-sensitive pricing, evaluations and reference data for millions of securities traded around the world, including hard-to-value instruments. Many of the world’s best-known financial service and software companies subscribe to the Company’s services in support of their trading, analysis, portfolio management and valuation activities. Interactive Data, headquartered in Bedford, Mass., has approximately 2,400 employees in offices located throughout North America, Europe, Asia and Australia.  Pearson plc (NYSE: PSO; LSE: PSON), an international media company, whose businesses include the Financial Times Group, Pearson Education, and the Penguin Group, is Interactive Data Corporation’s majority stockholder.

Interactive Data’s Pricing and Reference Data business provides global securities pricing, evaluations and reference data designed to support financial institutions’ and investment funds’ pricing activities, securities operations, research and portfolio management. Interactive Data collects, edits, maintains and delivers data on more than 6 million securities, including daily evaluations for approximately 2.8 million fixed income and international equity issues. Interactive Data specialises in ‘hard-to-get’ information and evaluates many ‘hard-to value’ instruments.

Pricing, evaluations and reference data are provided in the US through Interactive Data Pricing and Reference Data, Inc. and internationally through Interactive Data (Europe) Ltd. and Interactive Data (Australia) Pty Ltd.

For more information about Interactive Data Corporation and its businesses, please visit www.interactivedata.com

Interactive Data^SM and the Interactive Data logo are service marks of Interactive Data Corporation.

About Goal Group Limited

The Goal Group of Companies was incorporated on 1 November 1989 and is widely-acknowledged in the financial services sector for its innovative and creative solutions to highly-specialised niche processes.

Goal has a truly global, blue-chip client base including several of the world’s largest global custodians, asset managers, private banks, pension funds, local government agencies, hedge funds, high net-worth individuals, investment banks, prime brokers and fund managers spread widely across Europe, Asia and the United States.

Goal’s class actions service is provided via its wholly-owned subsidiary Goal Global Recoveries Limited (‘GGRL’) and supports investors and corporate entities who have suffered financial loss from owning shares in a company where there has been proven mis-management and/or unlawful behaviour.

Goal’s withholding tax solutions include GTRS, GQI, GOAL TaxBack and GDMS.  Research by Goal has shown that in excess of USD 10 billion of withholding tax remains unclaimed each year by the rightful owners and beneficiaries.  Goal’s solutions facilitate the reclamation of circa USD 11 billion per annum and assist its clients to benefit from relief at source wherever practicable and possible to do so.

For further information about the Goal Group of Companies, please visit www.goalgroup.com

For further information, please contact:

Investors

Andrew Kramer

Tel: +1 781-687-8306

Email: andrew.kramer@interactivedata.com

Media

Sue Mitchell (European media)

Tel: +44 (0)20 7825 8076

Email: sue.mitchell@interactivedata.com

Brian Willinsky (US media)

Tel: +1 781-687-8291

Email: brian.willinsky@interactivedata.com

After suffering substantial investment losses at companies hit hard by the credit crunch, a number of UK pension funds have revealed their involvement in class actions aimed at winning compensation.

The Northern Ireland Local Government Officers’ Superannuation Committee and the Lothian Pension Fund are among the lead plaintiffs in a US class action being undertaken against Lehman Brothers. Three separate cases have been brought against Lehman and are being co-ordinated; a debt and equity case, a mortgage based securities case and a case under Employee Retirement Income Security Act (ERISA) legislation.

The Royal Bank of Scotland is also facing a US class action, with the North Yorkshire and Merseyside pension funds named as being among investors seeking redress. In this case, two major US pension funds have been named as lead plaintiffs ahead of UK pension funds, but as US class actions operate on an ‘opt-out’ basis, all investors meeting the qualifying criteria for holding stock may submit a claim unless they have opted out.

An exception to this is if the US courts dismiss the claims of foreign investors or when a foreign investor held stock in a foreign company on a foreign exchange. In a class action against Vodafone, the claims of foreign investors were dismissed at trial court level but this decision was later reversed at the court of appeal.

In this regard, a class action against Shell could be relevant for UK pension funds. Here a US court ruled that it did not have jurisdiction over European investors, but the creation of a settlement foundation under Dutch law could be an alternative. Spector

Roseman Kodroff & Willis partner Robert Roseman said: “We are waiting for the Amsterdam court of appeal. It is an important decision for European investors, as it will allow them to have their own settlement after they have been excluded from a US class action.”

According to Caroline Goodman, managing director of Institutional Protection Services (IPS), a firm that specialises in helping schemes monitor and participate in class actions, if a UK pension fund with £1bn in assets fails to participate in class actions, it could be missing out on as much as £200,000 in settlements each year.

Stephen Everard, managing director of the GOAL Group, said nearly $12bn was left on the table by institutional investors who did not take part in class actions between 2000 and 2007 and $3.6bn of this was attributable to European investors. Everard added: “With the new wave of class actions instigated in the wake of the credit crunch, these losses are likely to soar in 2009 if institutional investors do not claim their slice of the pie.”

For pension funds, a securities class action is a legal mechanism that collectively compensates a group of litigants when they have suffered a loss at a company they hold stock in, due to mismanagement or wrongdoing at the company.

Thomas Dubbs, senior partner at US law firm Labaton & Sucharow, said: “Given that UK pension schemes often have a significant percentage of their equity investments in US stocks, or stocks that are cross-listed in the US, schemes can look at the US courts to take jurisdiction over claims they may have.”

UK pension funds taking part in a US class action may become lead plaintiffs if they are the largest investors in the stock in question. Dubbs said this can be a good thing: “The active involvement of public pension schemes can enhance the size of any settlement dramatically; sometimes by a factor of six.”

In theory, a scheme’s global custodian is responsible for monitoring any class actions that a scheme has an interest in, but this is not a core function for custodians and they may not be pro-active in monitoring class actions. As a result, US law firms specialising in class actions are developing relationships with pension funds in the UK and specialist services which monitor and process class action claims for pension funds are also springing up. David Paterson, the head of corporate governance at the National Association of Pension Funds (NAPF) says: “Do not underestimate the time and effort involved in leading a claim.”

In terms of time, Everard said the average class action settlement period was 17 months, from filing the claim to receiving payment, but the odd cases have gone on for over five years. While a class action may take some time to go through the courts, the nature of the US legal system means that pension funds should not be out of pocket. Dubbs says: “In the US, the lawyers work on a contingent fee mechanism whereby fees and costs come out of any settlement amounts at the end of the case. There is also no risk of the shifting of adverse legal costs to the other side if the case if unsuccessful.”

In contrast, it is possible for all legal costs to be awarded against one side in the UK. In addition, there is a more onerous duty on the plaintiff to demonstrate that it has a case, according to Paterson.

Some UK pension schemes may feel that securities class actions belong in a more confrontational US legal culture. Nevertheless, more schemes are now taking part in class actions. Picking up extra income for relatively little effort is one reason and some lawyers, like Dubbs, believe taking advantage of class actions is a fiduciary duty for trustees. “A claim in litigation, whether it is in the US or elsewhere, is an asset like any other and trustees need to take steps to be aware of what claims their scheme may have. The best way to do that is by monitoring their portfolio.” But Paterson is more circumspect on this point: “It is not all clear whether funds have a fiduciary duty to make a claim or participate in a settlement. It certainly makes practical sense, however.”

While some may see scheme involvement in class actions as a matter of good governance, there is also an argument that these cases can play a role in improving poorly managed companies. The NAPF’s Paterson said that the most effective tool for improving corporate governance was engagement with management, while class actions could inhibit this dialogue. But he added: “They do have their place, especially in the US, and can and should be used to achieve lasting changes in governance practices.”

For UK pension funds, class actions are not quite a free lunch, but they look like being a low cost, low risk source of useful additional income in today’s difficult climate.

Download the .pdf article Here
Source: Pensions Insight

The complaint filed yesterday by law firm Cohen Milstein Sellers & Toll include UK schemes Merseyside Pension Fund and North Yorkshire County Council pension fund and Dutch investor MN Services among several other non-US investors.

In May, the Massachusetts Pensions Reserves Investment Management Board (MassPRIM) and the Mississippi Public Employees Retirement System – who were nominated as lead plaintiff in the suit – said they would ask the court to include the European investors in the class actions.

Cohen Milstein Sellers & Toll partners Julie Reiser and Steve Toll said the two US pension funds were nominated as co-lead plaintiffs on behalf of those who invested in RBS ordinary shares, while a the Freeman Group, a group of five individuals, will be the lead plaintiff on behalf of the investors who purchased RBS preferred shares.

They added the suit alleges some members of the RBS board and executive team misrepresented the bank’s exposure to sub-prime and toxic assets as well as the economic consequences of RBS’ acquisition of ABN Amro.

Source: Global Pensions

AIG will be the next major class action case of interest for UK pension funds, according to a leading litigation lawyer.

Patrick Daniels, partner at Coughlin Stoia Geller Rudman & Robbins, said that while the door to becoming a lead plaintiff in a class action against the Royal Bank of Scotland (RBS) is now closed, he was certain cases would next be brought against struggling US insurer AIG.

“I can’t even count how many class actions there already are against AIG,” said Daniels. “AIG is one big litigation machine, it’s an unbelievable mess.”

He said that while he’s not involved with putting UK pension funds into a class action against AIG yet, he would be in the future.

Daniels is leading the securities case against RBS on behalf of three lead plaintiffs: Merseyside Pension Fund, North Yorkshire Pension Fund and Dutch fund manager MN Services.

His case hinges on the actions of RBS Greenwich Capital, a US-based subsidiary that housed the majority of RBS’s US sub-prime mortgage assets and used them to raise the capital to buy ABN Amro.

Daniels said he was confident that the courts would grant permission to pursue a class action, and “optimistic” that non-US investors would be able to participate as lead plaintiffs. Should the class certifications be issued, class representatives, or passive investors, could become involved within eight to 12 months.

The Tyne and Wear Pension Fund is currently involved in a class action dispute against UBS. Acting as a named plaintiff and class representative, Tyne and Wear is awaiting a decision from the courts to determine if the class actions will take place. Tyne and Wear’s investment officer Ian Bainbridge said UBS had filed a motion to dismiss, which the plaintiffs had challenged, and they were now awaiting a decision to be made by the US courts.

US law firm Gilman and Pastor are currently seeking a lead plaintiff for investors affected by AIG’s 0% bond between November 17, 2006 and April 10, 2008. Over 30 sales agents are named as co-defendants including Barclays Capital, Goldman Sachs, Lehman Brothers and UBS. The closing date for applicants is March 30, 2009. Stephen Everard, managing director of class actions solutions provider Goal Group, said: “It is very possible that further cases will be launched in similar AIG bonds, which were issued from 2005 onwards.”

Speaking to Professional Pensions, MN Services head of corporate governance Chris Douma said the company had decided to join the action based on the losses it had incurred through its exposure to RBS, but also to reaffirm the position of European investors in such cases.

He explained: “We see a growing number of class action cases where European investors are excluded from class action cases by US judges – we are convinced that European investors in European investors should be taken on board in cases such as these.”

Douma also refused to rue out participating in further actions in the US, although he conceded the company would probably not be a lead or co-lead plaintiff in other cases.

MN Services will join the UK’s Merseyside and North Yorkshire pension funds in the class action against the bank, which is seeking damages for alleged “materially false and misleading” statements about the bank’s financial health, which led to huge losses for investors (PP Online, March 16 2009).

Goal Group, which works alongside UK pension schemes and other institutional investors on class action cases, urged other schemes to follow suit and join the action.

Goal Group Managing Director Stephen Everards said: “Local authorities not participating in US class actions such as the RBS case risk losing out on a massive opportunity to seek compensation and plug their escalating pension gap.

“There remains a common misconception that the effort involved in filing a claim outweighs the benefits, however this is simply not true.”

He added: “This case is a real wake-up call for all UK local authorities that they can no longer afford to ignore their legal right – and indeed responsibility – to participate in US class actions. Local authorities are particularly exposed in the credit crisis because of their widespread investments in banks.”

Local authorities with investments in RBS have been urged to join a class action suit against the disgraced bank.

Councils in Merseyside and North Yorkshire have reportedly joined forces to file a class action law suit against RBS alleging that the bank misled investors about its financial position.

Nathan Skinner

The trio include Strathclyde Pension Fund, Scotland’s biggest, which estimates RBS’s woes have cost it about £50 million. It has more than 180,000 members, including staff at 12 councils. The Falkirk and Highland pension funds have also told The Scotsman they are watching an attempt to launch a “class action” against RBS in courts in the United States. The action is being led by Cherie Booth, QC, the wife of the former prime minister Tony Blair.

Peter Murphy: How system works to allow small investors their day in court against the corporate giants

If it goes ahead, a New York court will hear a claim the bank and Sir Fred Goodwin, its former chief executive, are liable for “massive losses” incurred by pension funds as a result of false information allegedly provided by RBS.

The case revolves around an allegation that RBS failed to inform prospective investors of the dire state of its balance sheet, in the aftermath of the takeover of parts of Dutch bank ABN Amro, when it mounted a £12 billion shares issue last year.

In Scotland, there are 11 public-sector pension funds, loosely based on the old system of regional councils. Most are thought to hold shares, or to have sold shares, in RBS. Members of these funds are typically the employees of the 32 current councils, plus civilian staff of the police and fire services.

Richard McIndoe, the head of pensions at Strathclyde Pension Fund, estimated losses to be “something in the region of £50 million” as a result of its investment in RBS. Strathclyde’s assets are invested by some 20 pension fund managers, but it appears that few – if any – shares continue to be held in RBS.

The fund’s total value has been tumbling in line with collapses in the FTSE 100 index. In December, the pension fund was valued at £8.1 billion; this fell to £7.7 billion in January.

Mr McIndoe said Strathclyde was considering whether to become more active in class actions after details of the US challenge to RBS emerged. This could involve action targeting RBS.

He said: “We don’t like to be a leading plaintiff, but we are keen on reviewing our participation in class actions. Our normal participation is that we let somebody else fight the case, but we would still collect at the end of the day. We are reviewing whether we should be more active.”

He said the use of class actions had begun as a US phenomenon but had become more widespread in Europe. “We would automatically be eligible for any part of any settlement,” he said. “You don’t have to fight the case, as long as you are part of the class that held the shares.”

Alastair Redpath, the treasury manager at Falkirk Council, said the pension fund – which incorporates Stirling and Clackmannanshire councils – included 5.8 million RBS shares.

He was unable to calculate the loss on those shares, but said fund managers had begun to purchase RBS shares again as a long-term investment.

He said of the US action: “We are currently watching the situation. If there is a class action that is formally approved to go forward, we would certainly be pitching in as well.

“Until such time as the judge in the case announces whether he is going to allow it as a valid class action, we, like any other pension fund, would anticipate lodging a claim.”

The Falkirk fund is worth about £800 million, compared with £950 million a year ago.

Highland Council holds a direct RBS shareholding of more than 1.2 million shares, valued yesterday at £262,557.

A spokeswoman said further RBS shares were held in a general fund linked to FTSE 100 companies, although it was impossible to quantify easily the value and size of this shareholding.

She said of the possibility of a class action: “We are interested in the news about that, but we would need to consider it.”

A fourth council pension fund, Lothian, also admitted holding shares in RBS. But the fund said it believed it would be unable to join the US claim, as the shares had been bought in London rather than New York.

Legal experts warned that UK councils and other investors should not be complacent about fighting to recover some of their losses. Stephen Everard, the managing director of Goal group, a class-action specialist, said: “Local authorities not participating in US class actions, such as the RBS case, risk losing out on a massive opportunity to seek compensation and plug their escalating pension gap.”

He said there were many precedents for authorities claiming compensation for financial losses incurred in the credit crunch.

Two council pension funds were leading a US class action against Lehman Brothers over subprime losses, while the West Midlands fund had recovered more than £355,000 in lawsuits against corporations and banks.

Mr Everard said a quarter of all claims that could have been filed by local authorities between 2000 and 2007 were not submitted to US courts, resulting in a loss of £200 million.

He added: “The RBS case is a real wake-up call for all UK local authorities, and they can no longer afford to ignore their legal right – and indeed responsibility – to participate in US class actions.”

Patrick Daniels, a founding partner of the firm Coughlin Stoia, which is taking the action through the New York courts, said last night: “The filing of the applications for the appointment for lead plaintiffs is the first step towards achieving justice for those hundreds of thousands of investors who have suffered huge financial losses.”

A spokesman for RBS declined to comment when contacted by The Scotsman last night.

JOBS CRISIS

THERE are ten applicants for every vacancy, underlining the jobs crisis in the UK, according to new figures. One of the worst-affected areas is the Western Isles, where 44 people are claiming jobseekers’ allowance for every new post available. Argyll and Bute has a ratio of 31 to one.

However, the Trades Union Council statistics show the worst place in Britain to find work is the Isle of Wight, where there are 60 claimants for every post. Brendan Barber, the TUC general-secretary, said: “The government can no longer claim there is plenty of work available.”

Jim Mather, the Scottish enterprise minister, claimed this showed that the UK government should set up a similar stimulus package to the one put together by the Obama administration in America.

He was already alarmed that the last figures showed UK unemployment numbers had topped more than two million for the first time in a decade, although proportionally Scotland has a lower rate of joblessness than the rest of Britain.

Bigwood joined GOAL Group in 2003 from Citigroup, and has since played an instrumental role in developing the Company’s core marketplaces in securities services – helping customers reclaim withholding tax on cross-border securities income and providing securities litigation services.

Stephen Everard, Managing Director, GOAL Group, comments,

Saghar has made an enormous contribution to the Company over the past six years, managing our market development with insight and effectiveness. She brings her wealth of industry contacts, market knowledge and tax expertise to the Board, further strengthening our management team to take us through our current phase of strong market growth. The international financial markets crisis has generated a new wave of subprime-related class action lawsuits, with European and Asian investors seeking redress for their losses, and this has created increased market demand for the products and services offered by GOAL Group.

Saghar joined GOAL Group with an already considerable track record in tax services, having worked with Dai-Ichi Kangyo, Bank of America and Citigroup. In her latter role, she headed up the tax department, which was responsible for global tax services in all parts of the world except Asia.

Bigwood joined in 2003 from Citigroup and has since developed the company’s core markets in securities services – helping customers reclaim withholding tax on cross-border securities income and providing securities litigation services.

Managing Director Stephen Everard said the group, established in 1989 was enjoying strong growth.  “The international financial markets crisis has generated a new wave of subprime-related class lawsuits, with European and Asian investors seeking redress for their losses, and this has created increased market demand for the products and services offered by GOAL Group.’’

Saghar was previously at Dai-Ichi Kangyo, Bank of America and Citigroup.  In her latter role, she headed up the tax department, which was responsible for global tax services in all parts of the world except Asia.

Goal counts global custodians, asset managers, private banks, pension funds, hedge funds, high net-worth individuals, investment banks, prime brokers and fund managers among its clients.

Class actions service is provided via the wholly-owned subsidiary Goal Global Recoveries Limited, which supports individuals and corporate entities who have suffered financial loss from owning shares in a company where there has been mis-management and/or unlawful behaviour.

GOAL has calculated that between 2000 and 2007, nearly £12 billion had been ‘left on the table’ by shareholders who had failed to seek redress for their loses.

Royal Bank of Scotland faces legal action from three of the country’s big local authority pension funds to reclaim some of the millions they have lost in the near-collapse of the bank.

The trio include Strathclyde Pension Fund, Scotland’s biggest, which estimates RBS’s woes have cost it about £50 million.  It has more than 180,000 members, including staff at 12 councils.  The Falkirk and Highland pension funds have also told The Scotsman they are watching closely an attempt to launch a “class action” against RBS in the United States courts.

The action is being led by Cherie Booth, QC, the wife of former prime minister Tony Blair.  If it gets the go-ahead, a New York court will hear a claim the bank and Sir Fred Goodwin, its former chief executive, are liable for “massive losses” incurred by pension funds as a result of false information allegedly provided by RBS.

The case revolves around an allegation that RBS failed to inform prospective investors of the dire state of its balance sheet, in the aftermath of the takeover of parts of Dutch bank ABN Amro, when it mounted a £12 billion shares issue last year.

In Scotland, there are 11 public sector pension funds, loosely based on the old system of regional councils.   Most are thought to hold shares, or to have sold shares, in RBS.

The Scotsman

A report from GOAL Group, a European withholding tax and class action service specialist, has revealed that since 2000 institutional investors’ non-participation in US securities class actions resulted in billions being left on the table, a significant proportion being attributable to European pension funds.

And while previous class action lawsuits were primarily related to corporate governance scandals such as Enron, there has now been a surge of class action lawsuits inspired by the international credit crisis.

Stephen Everard, managing director of GOAL Group explained:  “Although the Sarbanes-Oxley Act and European equivalents are undoubtedly suppressing the possibility of further Enrons and Parmalats, new factors have arisen in the financial and corporate markets where class actions are being used to try and claim compensation for shareholders and investors.  We are currently seeing a surge of class action lawsuits inspired by the international credit crisis”.

But while lawsuits may have increased in this area, said Everard, many pension funds are still failing to make claims for what’s rightfully theirs.  “Pension funds are more aware that they should be getting involved in class actions, but this doesn’t mean they are doing anything about it.  Previously, perhaps, they aware afraid to have their names associated with corporate scandals or mismanagement, and so were reluctant to get involved, especially as a lead plaintiff, but there is a whole raft of cases now arising off the back of the sub-prime crisis and there is less stigma attached to these cases as no-one could have seen it coming’’.

Commenting on whether European pension funds are actually under a duty to get involved, Caroline Goodman, managing director of Institutional Protection Services, said:  “It is generally accepted in Europe that investors don’t have a duty to get actively involved in the litigation per se, but they do have fiduciary duty to know where their investments are impacted by securities class actions and to claim their part of the settlement pool (assuming it is cost effective to do so) in order to both protect and maximise their beneficiaries and shareholders’ assets.’’

Management Summary

• Filings for securities class actions are on the rise again in the US

• Total securities class action settlements in 2007 are down on 2006, but the average settlement rate is up

• Over 25% of claims that could be filed by entitled parties are left unprocessed and unrecovered, despite opinion that institutional investors are legally obliged to instigate such claims on behalf of their clients

• Between 2000 and 2007, almost $12bn in settlements, to which shareholders were entitled, was not reclaimed.  Some $3.6bn of this total can be attributed to European investors

• Astute and responsible institutional investors are already using one of the outsourced, automated services available on the market to process class action claims without incurring high expense

Introduction

Class actions – where many litigants combine to pursue a joint action against a single defendant for their collective claim for damages – used to be a purely US phenomenon.  Other countries’ legislatures had mechanisms for joint actions, but these were rarely employed.  Now the world is changing.  Since the corporate governance scandals around the millennium – Enron is the prime example – class actions in the US courts have been used by non-US shareholders to seek redress for their losses.  And this is now spreading to other legislatures.  The legislature in Australia is already well developed, and various pundits now predict an escalating level of class action – or equivalent – in Europe.  This paper seeks to quantify the level of redress being successfully claimed through the US courts, as well as painting a picture of the emergence of the joint legal process in respect of securities-oriented litigation in other geographies.

Let us first deal with the situation in North America.  In the United States, the securities markets are regulated and policed by bodies such as the Securities Exchange Commission and by investor representative bodies.  Class action litigation has been used by groups of shareholders to recover losses stemming from fraud and misgovernance for decades.  However, since the late 1990s, a number of major frauds have come to light, which largely contributed to the bursting of the dotcom bubble and the subsequent economic trough that followed in most of the Western world.  Nor were these corporate frauds confined to the United States.  According to research body Nera Economic Consulting, the top ten Shareholder Class Action Settlements since 2000 have ranged from Enron Corp., at just over $7.2bn, to Lucent Technologies Inc., at just over half a billion dollars.  In between this range come well-known US firms such as Worldcom and AOL Time Warner, as well as European companies including Royal Ahold and Parmalat.  If mega-settlements such as these are included in the average class action securities settlement, then that average sits at some $54m.  If settlements over $1bn are excluded, then the average remains at a staggering $33.2m.

One-off, or With Us For Good?

There is a question often asked in the legal arena as to whether these class action cases – and settlements – were a one-off affair; whether the gross misconduct of the late nineties and early noughties would perpetuate, especially since the misbehaviour of this period gave birth to the Sarbanes-Oxley Act (SOXA) which was aimed at deterring such misdemeanours.  In answer to this question, to date, there are two factors to consider.  First, such class actions have a long tail.  235 federal actions were filed in 2000.  To date over 90% have reached some form of resolution.  60% have been settled and 30% dismissed, broadly speaking.  But some still have further to go, even eight years later.  Secondly, a downturn in actions filed in 2006 raised the possibility that shareholder class actions – in the US at least – were on the wane.  The figures from 2007, however, give this the lie, as we have seen renewed vigour in the courts.  The main authorities[1] on the subject tell us that securities class action lawsuits filed in 2007 are up between 43% and 58% (definitions vary) on 2006, with up to 207 such actions instigated during the year.  Evidently preventative legislation, in the form of SOXA have opened the door to more class actions as a result of the very transparency and reporting which the Act requires.  The same is true of transparency regulation and legislation in Europe – a situation that is likely to accelerate on the Eastern side of the Atlantic as the EU moves towards implementing its own SOXA equivalent in the form of the 8^th Company Law Directive on Statutory Audit.

Part of the reason for the upturn has been the recent crisis in the subprime mortgage market, inspiring a surge of class action lawsuits.  To the end of the year, 32 subprime class actions had been filed in the United States, in the main against mortgage companies and lenders who had allegedly improperly inflated the value of their mortgage books and were being accused of failing to disclose that loans may have been based on substandard appraisals.  We may conclude, therefore, that although SOXA and its European equivalents are undoubtedly suppressing the possibility of further Enrons and Parmalats, new factors have arisen in the financial and corporate markets where class actions are being used to try and claim compensation for shareholders and investors.  Moreover, most pundits are predicting that the credit crisis will affect corporate, as well as financial, organisations, and that the results of its contagion will be felt worldwide in 2008.  Since we have evidence that resolution of the cases can take 5-7 years, then the subprime crisis will undoubtedly spawn another half a decade’s worth of business for class action lawyers, their clients and the courts.

European Claims Abroad

What happens in the USA is of no small interest to European investors.  The typical European share portfolio, especially amongst institutional investors, is strongly international.  The average balance is in the order of 75% domestic shares, 25% foreign shares.  And the US is one of the most attractive markets for European investors, with its transparent reporting rules, and its cultural similarity for investors operating out of London, Europe’s largest financial centre.  Since the millennium, there has been a noticeable shift in the US courts, as an increased number of European investors have sought to lead shareholder class actions against both US and European companies.  Between 2000 and 2003, 68 foreign companies were sued by their shareholders in US class actions, of which 24 were European[2].  Well known European firms that have come before the US courts are Parmalat, Shell Transport, Vivendi, Daimler Chrysler and Cable & Wireless, to name just a small sample.  However, when a European firm is being sued in a class action in the US, European investors need to be particularly alert, and ensure that they are included in the list of litigants.  Where an American investor controls the class action, there is a twofold temptation to exclude foreign investors.  First, arguments around the jurisdiction of the US courts regarding foreign shareholders are avoided, making the legal process potentially quicker and less expensive.  Secondly, the fewer the claimants, the greater the proportion each will receive from any settlement.  These two dangers have inspired European companies to become active litigants in US class actions – for instance in the Parmalat case, where all of the lead plaintiffs are European.

Class Actions in Europe

Class action in the different European legislatures is much discussed, but is not yet implemented.  In the UK, US-style class actions are not allowed, but two other instruments – group litigation orders and representative claims – are available, even though they do not ensure the finality of claims. In Spanish law, various consumer associations and bodies are legally constituted to defend the collective interest of injured groups.  French legislation only allows only individual actions, although in recent years, the introduction of class action legislation has been seriously considered.  Germany has introduced legislation, called the capital markets sample proceedings act (KapMuG) which refers to a highly restricted number of capital markets transactions.  This is effectively a legal experiment, and will be monitored until 2010 to examine how effectively the legislation works.  Finally, Italy and the Netherlands both have laws which allow collective action to compel certain types of corporate behaviour, but damages claims still have to be largely pursued through separate action.  The introduction of class actions in Italy is currently on the political agenda.  Despite these hurdles, expectation amongst European corporates is that class actions on their home turf is just around the corner.  A survey from last October[3], amongst 240 European executives and lawyers, found that around half of them (49%) expect their domestic courts to expand access for groups of individuals acting collectively in the next three years.  59% said they expected to see collective litigation take root in the UK over the next three years.

Interestingly, it is not Europe but Australia where shareholder class actions are straightforward to pursue, and have taken hold.  The legislative basis for class actions was introduced into Australian law has existed at the federal level since 1992, with the introduction of Part IVA of the Federal Court Australia Act of 1976.  In recent years, it has been regularly suggested that Australia is the most likely geography outside of the USA in which corporations will face a rising tide of class action lawsuits.  In parallel to the American experience, the largest corporate collapse in Australian history – that of HIH Insurance in 2001 – has helped to accelerate class actions being employed as a vehicle for prosecuting claims for shareholder damages.  More recent examples include the settlement by Telstra of shareholder class action for breaching continuous disclosure obligations, although this was for $5m rather than the action’s original $300m.

We have established that European shareholders have got wise to the possibility they could be left out of securities class actions in the US unless they take an active role in a lawsuit.  Now, we come to the question of how efficiently and effectively the interests of the totality of interested shareholders are being represented in securities class actions in the US.

Unclaimed Funds

The findings of various parties – both within the legal profession and academic studies – have revealed that non-claims are estimated to amount to anywhere between 25% and 35% of total settlements[4].  To quote one authoritative source, it appears that, “some institutional investors are not filing claims in securities fraud class action settlements, and are therefore leaving potentially large sums of money on the table…. We have attempted to answer the question of whether institutional investors are leaving money on the table by failing to file claims in securities fraud class actions. We think that their fiduciary duties to file such claims are clearly established by existing law, and that the costs of filing such claims are likely to be trivial. Thus, even if the benefits from filing are small, institutional investors should be filing claims in these settlements.  We conclude that it appears that many of these investors are failing to file such claims[5].”

In order to quantify the scale of losses to investor through non-registration in securities class action lawsuits, Goal Group combined its historical records of registration and settlement claims, with market data sources.  The results were stark.  Almost $12bn has not been claimed on behalf of entitled investors between 2000 and 2007.  $3.6bn of this total can be attributed to European investors.  A huge spike of losses was experienced in 2006, the year when the bulk of the mammoth Enron settlement was finally authorised by the courts.  However, 2007 also saw a strong throughput of mega-settlements, as well as an overall increase in filings over 2006.

Keeping track of the opportunities to make a claim, and the actions required to do so successfully, can be a complicated and daunting task, particularly for European investors. Such an undertaking requires timely and accurate information about the relative merits and procedural processes of the actions. It also re­quires the time and resources to review and evaluate relevant settle­ment provisions. Investors must then cross-reference these outputs against extensive individual trading activity data and then com­pile and submit the often complex paperwork necessary to make a valid claim.

Automated and Outsourced Claim Management

A majority of institutional investors seem to be­lieve that the cost and time taken to undertake these tasks is likely to outweigh the benefits from potential settlement recoveries. This is often not the case.

The demand for efficient and affordable means of par­ticipating in securities class actions and recoveries has inspired development of outsourced services that overcome the claim processing complexities. These services combined legal and procedural expertise, with a shared knowledge-bank and alert facility.  The key processes comprise:-

• Pinpointing and informing investors of portfolio losses suf­fered allegedly due to corporate fraud or malfeasance
• Delivering accurate and appropriate legal advice concerning US law, investors’ legal  rights and their legal options
• Tracking and monitoring securities class actions both in the US legal system and globally
• Putting strategies and procedures into action for investors’ to submit valid claims and recover settled funds.

Such automated processes and services are now widely available for investors, fund managers and custodians to process all the necessary corporate actions to register and pursue a claim through a class action.  This extends to the automatic alerts which prompt such claims in the first place.  Costs vary between services, but all are minimal in relation to the settlement sums recovered.  Since it is the judgement of academic legal commentators that there is a clear duty of care for institutional investors to register claims on behalf of their clients, it would seem that there is dangerous gap in the reclamation process, and one that (according to GOAL’s data) has narrowed little in recent years.

Conclusion

In conclusion, it seems that securities class actions in the US are once again on the increase, based on the continued growth of mega-settlements, as well as the upward trend in class actions filed.  In the early 2000s, corporate fraud was the main instigator of class actions;  the mantle now seems to be passing to cases born out of the recent international credit crisis.

Around one quarter of all entitled parties still do not seem to be claiming their share of settlement payouts resulting from the class actions.  The result is that since the millennium, just short of $12bn that could have been claimed, was ‘left on the table’ (as one commentator put it).  There is an urgent need (indeed, legal obligation) for institutional investors to make claims on behalf of their clients where a class action is involved.  And since there are now low-cost services which are already enabling many financial organisations to do so, there remains no excuse for ignoring this important client responsibility.

Methodology

Publicly available data sources on class action settlements were combined with GOAL Group’s own proprietary datasets in order to quantify the levels of unclaimed damages in securities class actions in the US between 2000 and 2007.

Third party sources consulted include:-

• The Securities and Exchange Commission
• World Federation of Stock Exchanges
• International Monetary Fund
• Vanderbilt Law School
• Duke Law School
• NERA Economic Consulting
• Cornerstone Research
• Stanford Law School
• Mallesons Stephen Jaques
• The 10b-5 Daily
• PriceWaterhouseCoopers
• The Financial Times
• Freshfields Bruckhaus Deringer
• Spector Roseman & Kodroff

[2] Source: PriceWaterhouseCoopers

[3] Economist Intelligence Unit/Bryan Cave LLP, Collective Litigation in Europe, October 2007

[4] See, for instance:-  James D Cox, Randall S Thomas, Leaving Money on the Table; Do Institutional Investors Fail to File Claims in Securities Class Actions, 2002;   Pensions & Investment News, Should European institutions make the effort to see companies in court?, 26 September

[5] Ditto

Between 2000 and 2007, almost US$12bn in settlements to which shareholders were entitled was not claimed, and some US$1.5bn of that amount was attributable to investors in Asia.  Institutional investors in Japan, Singapore and Hong Kong were the most impacted.

“Increasingly, the prevailing view is that there is a clear duty of care for institutional investors in the Far East to register claims in US courts on behalf of their clients, but our research shows that non-participation is costing investors dearly,”  said Stephen Everard, managing director, GOAL Group.

“The Far East investors’ perspective merits as much attention as that of European investors, but there has been little talk of their involvement.  The increasing movement in various Far East legislatures towards improved corporate governance and shareholder activism will inevitably lead to rising interest in the performance of investors’ overseas holdings.”

The average settlement in class action cases is around US$30m, but investor losses (a major factor determining settlement size) in sub-prime cases are thought to be 10 times higher than in other cases, the report said.

One of the reasons keeping regional investors away from participating was the effort involved in the process.  Keeping track of the opportunities to make a claim and the processes required to do so successfully can be a complicated and daunting task – and many institutional investors believe the costs and time involved are likely to outweigh the benefits.  Some 25% of claims that could be filed by entitled parties are left unprocessed.

Management Summary

• In the wake of the financial markets crisis, filings for securities class actions are on the rise again in the US

• Average settlement values are around $30 million. But average investor losses (a major factor determining settlement size) in ‘subprime’ cases are thought to be 10 times higher than other cases.

• Over 25% of claims that could be filed by entitled parties are left unprocessed and unrecovered, despite opinion that institutional investors are legally obliged to instigate such claims on behalf of their clients

• Between 2000 and 2007, almost $12bn in settlements, to which shareholders were entitled, was not reclaimed.  Around $3.6bn of this total can be attributed to European investors, and almost $1.5bn to investors in the Far East.

• Participating in class actions is increasingly viewed as an essential element of responsible institutional investment.  Astute managers are already using one of the outsourced, automated services available on the market to process class action claims without incurring high expense

Introduction

In the US, class actions – where many litigants combine to pursue a joint action against a single defendant for their collective claim for damages – have been used by groups of shareholders to recover losses stemming from fraud and misgovernance for decades.  However, since the late 1990s, the picture has changed dramatically.  The corporate governance scandals around the millennium – Enron is the prime example – and the bursting of the dotcom bubble ushered in a new era of class actions, where the issues of shareholder rights and corporate accountability rose to the fore.  American corporations as well as foreign firms began to be called to account in the US courts and subsequently, foreign shareholders also began to seek redress for their losses.  Part of the reason for this is without doubt the absence of class action procedures in most other countries (with the notable exceptions of Australia, Canada and South Korea) but various commentators now predict that similar legal frameworks – or equivalent – will be introduced in other legislatures.  This paper seeks to quantify the level of redress being successfully claimed through the US courts by non-US shareholders – especially those in Europe and Asia – and briefly looks at the emergence of the joint legal process in respect of securities-oriented litigation in other geographies.

The Rising Tide

According to research body NERA Economic Consulting, the top ten Shareholder Class Action Settlements since 2000 have ranged from Enron Corp., at just over $7.2bn, to Lucent Technologies Inc., at just over half a billion dollars.  In between this range come well-known US firms such as Worldcom and AOL Time Warner, as well as European companies including Royal Ahold.  If mega-settlements such as these are included in the average class action securities settlement, then that average sits at some $54m.  If settlements over $1bn are excluded, then the average remains at a staggering $33.2m.

Given that the first wave of these ‘mega-settlements’ was triggered by a specific period of corporate misconduct in the late nineties and around the turn of the millennium, a question often asked in the legal arena is whether these class action cases – and settlements – were a one-off affair, especially since this period gave birth to the Sarbanes-Oxley Act (SOXA) which was aimed at deterring such misdemeanours.  In answering this question, it is firstly important to note that such class actions have a long tail.  235 federal actions were filed in 2000.  To date over 90% have reached some form of resolution.  60% have been settled and 30% dismissed, broadly speaking.  But some still have further to go, even eight years later.  Secondly, a downturn in actions filed between mid-2005 and mid-2007 prompted many commentators to speculate on the demise of US class actions but figures from 2007 onwards give this the lie.  We have seen renewed vigour in the courts, with the main authorities[1] on the subject telling us that securities class action lawsuits filed in 2007 are up between 43% and 58% (definitions vary) on 2006, with over 200 such actions instigated during the year. This upturn has continued into 2008, with 139 filings during the first six-months. If this pace is maintained, then 2008 could result in around 280 filings, a level not witnessed since the 2002 collapse of Enron and the “tech bubble”. It has been observed that just over half of these filings so far in 2008 involve allegations relating to the subprime collapse.

We may conclude, therefore, that although SOXA and its European equivalents are undoubtedly suppressing the possibility of further Enrons, the international financial markets crisis has already spawned a multitude of cases where class actions are being used to try and obtain compensation for shareholders and investors.  Since we have evidence that the first wave of subprime-related filings is well under way, and that resolution can take 5-7 years, then the subprime crisis will undoubtedly remain the catalyst for at least another half a decade’s worth of class action cases.

Foreign Involvement

As we have already observed, several high-profile non-US firms have come before the Federal courts.  These include Parmalat, Royal Dutch Shell, Vivendi and Daimler Chrysler. Leading commentators tell us that between 2000 and 2003, 68 foreign companies were sued by their shareholders in US class actions, of which 24 were European[2]. However, the number of securities class action lawsuits filed against foreign issuers fell from 19 in 2005 to 13 in 20062, which represents the lowest number filed against foreign issuers in the last seven years. Despite this, there remains substantial motivation for aggrieved foreign institutional investors to become actively involved in class actions, whether it is a US or foreign firm being sued. This is especially the case for European investors, as the typical European share portfolio is strongly international.  The average balance is in the order of 75% domestic shares, 25% foreign shares.  Moreover, the US is one of the most attractive markets for European investors, with its transparent reporting rules, and its cultural similarity for investors operating out of London, Europe’s largest financial centre.  But for other non-US investors who have shareholdings in US-listed firms, the imperative to participate in securities litigation is just as strong. Many commentators have noted the huge losses incurred by funds due to the subprime crisis. The Financial Times, for instance, notes: “Pension funds across Europe, Asia and North America stand to lose hundreds of billions of dollars from investment in so-called ‘toxic’ assets.”[3]

The involvement of foreign investors in US litigation is not a given, though. It is a sensitive matter and largely depends on case-by-case decisions by US courts[4].   The likelihood of successful participation is greater if the non-US firm becomes a lead plaintiff.  It is widely felt that if an American investor controls the class action, there is a twofold temptation to exclude foreign investors.  First, arguments around the jurisdiction of the US courts regarding foreign shareholders are avoided, making the legal process potentially quicker and less expensive.  Secondly, the fewer the claimants, the greater the proportion each will receive from any settlement.  Therefore there are already been several precedents of non-US firms becoming lead plaintiffs, in some cases encouraged to do so by US legal firms who have started to actively market their services overseas.  In the Parmalat case, for instance, all the lead plaintiffs are European. In 2007 the first UK local authority pension fund, Avon, was appointed lead plaintiff in the case against GlaxoSmithKline.  It has been reported that in each year since 2002, international institutional investors have filed lead plaintiff motions in around 5% of all US class actions, with German and Austrian funds being the most active.

Eastern Promise?

Until recently, comment on the subject of US class actions in the Far East seemed to focus rather more on the implications for issuers than investors. In particular, there is much discussion about the possibility (or danger) that as more firms in the Far East list their shares on US stock exchanges, they could become the subject of class action litigation themselves. It has been reported that cases such as China Life – a state-owned insurance enterprise that listed on the New York Stock Exchange in 2003 and had a legal claims brought against it for alleged financial irregularities – have the effect of deterring local firms from seeking a US listing, despite the case having been dismissed by the US court.  One report notes: “American investors are demanding better corporate governance practices from foreign companies.” [5] But it is not only American investors that are doing so – there is an increasing movement in various Far East legislatures towards improved corporate governance and shareholder rights, which we will come back to later in this paper.

When it comes to US class actions participation, the Far East investors’ perspective merits as much attention as that of European investors, but there has been little talk of their involvement.  Overall, 12.5% of all foreign investment in US equities can be attributed to Far East investors, the majority based in the three largest markets (by market capitalisation) of Japan, Hong Kong and Korea.  Cultural reasons certainly play a role in explaining why Far East investors are not known for becoming active litigants in the US.  There is scant history of shareholder activism although this is gradually changing. As the OECD states, “Asian business cultures often prefer quiet, informal dispute resolution as a way for all parties involved to “save face” and to keep their business affairs out of the public eye”[6]. Other commentators observe the “Japanese predilection against litigation”[7] and that “Investors in Hong Kong are quiet, meek…”[8]. Although these comments relate to the attitude of investors in the domestic market, the culture of shareholder pacifism must go some way to explaining the reticence of Far East institutional investors in US litigation.  Conservatism is also reflected in other areas of investment strategy – a recent report highlighted that “the bulk of the $1.5 trillion in [Japanese] public pensions is languishing in ultraconservative investments such as government bonds instead of being in a more balanced portfolio with medium-risk-medium-return securities”[9].  However, as the trend towards globalisation begins to have a greater impact on investment strategy in the Far East, interest in the international element of securities holdings is likely to increase.  Even at the present stage, there is much potential for investors to recoup investment losses through the US courts. The Financial Times corroborates this sentiment with specific relation to China -  “Pressure on trustees and fund managers is likely to increase as securities class actions become a global phenomenon.”[10]

Class Actions Globally?

The introduction of securities-related class action legislation is generally viewed as a key step towards improving corporate governance, protecting investor rights and bolstering market credibility. Impetus for investor legislation often intensifies in the wake of major corporate scandals, such as the Sarbanes-Oxley Act in the US after Enron; the Class Action Act of South Korea instigated by mismanagement and fraud in the economic crash of 1997; and class action legislation in Australia following the collapse of HIH Insurance. That said, there is now an inexorable global movement towards corporate governance reform, with increasing numbers of legislatures adopting mechanisms similar to the US model or currently considering their own approach.

The European Picture

Class actions in the different European legislatures is much discussed, but is not yet implemented.  In the UK, US-style class actions are not allowed, but two other instruments – group litigation orders and representative claims – are available, even though they do not ensure the finality of claims. In Spanish law, various consumer associations and bodies are legally constituted to defend the collective interest of injured groups.  In France, securities investors have been able to act jointly through authorised, non-profit investor organisations since 1994 (under article L. 452-2 of the French Financial and Monetary Code) but debate continues regarding the introduction of class actions in French law (albeit focused on protecting consumers rather than investors).  Germany has introduced legislation, called the capital markets sample proceedings act (KapMuG) which refers to a highly restricted number of capital markets transactions.  This is effectively a legal experiment, and will be monitored until 2010 to examine how effectively the legislation works.  An Italian-style class action law was passed in December 2007 and it seems that investors, as a class, are eligible to use this[11]. The Dutch Civil Code allows representative organisations to bring actions to protect the interests of others, and in 2005 a new Act came into force facilitating the collective settlement of mass damages.

Despite the fact that European implementation of collective litigation is mixed, expectation amongst European corporates is that class actions on their home turf is just around the corner.  A survey from October 2007[12], amongst 240 European executives and lawyers, found that around half of them (49%) expect their domestic courts to expand access for groups of individuals acting collectively in the next three years.  59% said they expected to see collective litigation take root in the UK over the next three years.

Canada and Australia Lead the Way

Interestingly, class actions are far more straightforward to pursue – and have taken hold – in Australia and Canada.  The legislative basis for class actions was introduced into Australian law since 1992, with the introduction of Part IVA of the Federal Court Australia Act of 1976.  In recent years, it has been regularly suggested that Australia is the most likely geography outside of the USA in which corporations will face a rising tide of class action lawsuits.  In parallel to the American experience, the largest corporate collapse in Australian history – that of HIH Insurance in 2001 – has helped to accelerate class actions being employed as a vehicle for prosecuting claims for shareholder damages.  More recent examples include the settlement by Telstra of shareholder class action for breaching continuous disclosure obligations, although this was for $5m rather than the action’s original $300m.  Most provinces of Canada and the Federal Court had successfully achieved widespread reform of class actions by the early 2000s, which represented the culmination of several decades of reform efforts.

The Far East Joins the Fray

We noted earlier in this paper that, historically speaking, shareholder activism has not been widespread amongst Far East investors.  However, in recent years various associations and investor rights groups have increasingly managed to get their voice heard, such as the Securities Investors’ Association of Singapore (SIAS) and the Asian Roundtable on Corporate Governance, organised by the Organisation for Economic Co-operation and Development (OECD). The latter met in 2006 in Singapore and delegates pledged themselves to further corporate governance reforms in the region.

The Financial Times observes: “But after a decade of reforms, Asia’s company law frameworks and corporate governance codes are close to global best practice. The flaws are largely in implementation and enforcement.”[13] Indeed several legislatures have had a legal framework for class actions for years but there is a significant gap between theory and practice, with the prevailing sentiment that filings were hindered by high minimum share requirements, high court filing fees or other mechanisms to actively discourage litigation.  In China, several types of “collective suits” were unexpectedly introduced into the 1991 Civil Procedure Code, following growth in the volume and scope of multiparty disputes. But it was not until 2002 that the authorities “lifted the litigation floodgates”[14] by addressing procedural issues that had previously hampered the filing of joint suits. Even so, the culture of shareholder silence will take many years to change.  One operational aspect of filing class actions that may encourage Far East investors to become more involved is that shareholders’ names remain anonymous unless they choose to put themselves forward as lead plaintiff.

Following years of discussion, South Korea passed a Class Action Act in 2005, as part of a wider initiative to ‘clean up’ the accounts of its listed corporations. It was introduced in two phases – initially limited to the largest listed companies (with assets of over 2 trillion won) and then allowing suits to be filed against listed companies of all sizes from 2007. Currently there is no specific securities-related class action legislation in Japan or Hong Kong.

We have established that global shareholders have got wise to the possibility they could be left out of securities class actions in the US unless they take an active role in a lawsuit.  Now, we come to the question of how efficiently and effectively the interests of the totality of affected shareholders are being represented in securities class actions in the US.

Unclaimed Funds

The findings of various parties – both within the legal profession and academic studies – have revealed that non-claims are estimated to amount to anywhere between 25% and 35% of total settlements[15].  To quote one authoritative source, it appears that, “some institutional investors are not filing claims in securities fraud class action settlements, and are therefore leaving potentially large sums of money on the table…. We have attempted to answer the question of whether institutional investors are leaving money on the table by failing to file claims in securities fraud class actions. We think that their fiduciary duties to file such claims are clearly established by existing law, and that the costs of filing such claims are likely to be trivial. Thus, even if the benefits from filing are small, institutional investors should be filing claims in these settlements.  We conclude that it appears that many of these investors are failing to file such claims[16].”

This view now prevails in many areas of institutional investment. In 2007, the body governing Britain’s biggest pension funds, the UK National Association of Pension Funds (NAPF), spoke out about the importance of its members participating in US class actions. David Paterson, the NAPF’s head of corporate governance, was quoted as saying: “Pension trustees have a duty to protect the assets in their scheme. At the very least they shouldn’t neglect opportunities to recoup losses, especially where the cost and effort of doing so are commensurate with the expected return.”

In order to quantify the scale of losses to investors through non-registration in securities class action lawsuits, Goal Group combined its historical records of registration and settlement claims, with market data sources.  The results were stark.  Almost $12bn has not been claimed on behalf of entitled investors between 2000 and 2007.  $3.6bn of this total can be attributed to European investors, and $1.5bn to those in the Far East.  A huge spike of losses was experienced in 2006, the year when the bulk of the mammoth Enron settlement was finally authorised by the courts.  However, 2007 also saw a strong throughput of mega-settlements, as well as an overall increase in filings due to the emerging wave of litigation relating to the subprime crisis.

Keeping track of the opportunities to make a claim, and the actions required to do so successfully, can be a complicated and daunting task. Such an undertaking requires timely and accurate information about the relative merits and procedural processes of the actions. It also re­quires the time and resources to review and evaluate relevant settle­ment provisions. Investors must then cross-reference these outputs against extensive individual trading activity data and then com­pile and submit the often complex paperwork necessary to make a valid claim.

Automated and Outsourced Claim Management

A majority of institutional investors seem to be­lieve that the cost and time taken to undertake these tasks is likely to outweigh the benefits from potential settlement recoveries. This is often not the case.

The demand for efficient and affordable means of par­ticipating in securities class actions and recoveries has inspired the development of outsourced services that overcome the claim processing complexities. These services combine legal and procedural expertise, with a shared knowledge-bank and alert facility.  The key processes comprise:-

• Pinpointing and informing investors of portfolio losses suf­fered allegedly due to corporate fraud or malfeasance
• Delivering accurate and appropriate legal advice concerning US law, investors’ legal  rights and their legal options
• Tracking and monitoring securities class actions both in the US legal system and globally
• Putting strategies and procedures into action for investors’ to submit valid claims and recover settled funds.

Such automated processes and services are now widely available for investors, fund managers and custodians to process all the necessary corporate actions to register and pursue a claim through a class action.  This extends to the automatic alerts which prompt such claims in the first place.  Costs vary between services, but all are minimal in relation to the settlement sums recovered.  Since it is the judgement of academic legal commentators that there is a clear duty of care for institutional investors to register claims on behalf of their clients, it would seem that there is dangerous gap in the reclamation process, and one that (according to GOAL’s data) has narrowed little in recent years.

Conclusion

In conclusion, it seems that securities class actions in the US are once again on the increase.

Not only is the volume of lawsuits increasing, but the average filing loss (and therefore settlement size) is also on the rise. In the early 2000s, corporate fraud was the main instigator of class actions; the mantle now seems to be passing to cases born out of the recent international credit crisis.  With subprime cases, investor losses are 10 times higher than in other cases, according to NERA Consulting.

Around one quarter of all entitled parties still do not seem to be claiming their share of settlement payouts resulting from the class actions.  The result is that since the millennium, just short of $12bn that could have been claimed, was ‘left on the table’ (as one commentator put it).  Furthermore, as we move into the next decade, it seems likely that the spread of geographies and legislatures in which class actions are gaining traction will continue to widen.  For institutional investors across the globe, there is an urgent need (indeed, legal obligation) to make claims on behalf of their clients where a class action is involved.  Moreover, since there are now low-cost services which are already enabling many financial organisations to do so, there remains no excuse for ignoring this important areas of client responsibility.

Global (non-US) Investor losses through class action non-participation 2000-2007

Far East Investor losses through class action non-participation 2000-2007

Methodology

Publicly available data sources on class action settlements were combined with GOAL Group’s own proprietary datasets in order to quantify the levels of unclaimed damages in securities class actions in the US between 2000 and 2007.

Third party sources consulted include:-

• The Securities and Exchange Commission
• World Federation of Stock Exchanges
• International Monetary Fund
• Vanderbilt Law School
• Duke Law School
• NERA Economic Consulting
• Cornerstone Research
• Stanford Law School
• Mallesons Stephen Jaques
• The 10b-5 Daily
• PriceWaterhouseCoopers
• The Financial Times
• Freshfields Bruckhaus Deringer
• Spector Roseman & Kodroff

[2] PriceWaterhouseCoopers

[3] The Financial Times, Pensions have billions in toxic assets,  20 October 2008

[4] International Herald Tribune, U.S. firm seeks broad lawsuit against Société Générale, 30 July 2008

[5] For instance: CFO Asia, Liabilities’ Long Arm, July/Aug 2004

[6] OECD, Asian Roundtable on Corporate Governance, June 10 2003

[7] Japan Society (New York) and Harvard Law School’s Program on International Financial Systems, Enforcement in the U.S. & Japan, with Lessons from the UK, Feb 1 2008

[8] CFO Asia, Lack of Support, March 2003

[9] Business Week, Japan to Global Investors: Shareholder Activism Won’t Work Here, April 17 2008

[10] The Financial Times, Time to claim your slice of the pie, May 2005

[11] Legal Week, Italy: Class of its own, June 26 2008

[12] Economist Intelligence Unit/Bryan Cave LLP, Collective Litigation in Europe, October 2007

[13] The Financial Times, Wrong lessons from Asia’s crisis, July 01 2007

[14] The Globalization of Class Actions Conference, Collective and Representative Actions in China, Michael Palmer and Chao Xi, November 2007

[15] See, for instance:-  James D Cox, Randall S Thomas, Leaving Money on the Table; Do Institutional Investors Fail to File Claims in Securities Class Actions, 2002;   Pensions & Investment News, Should European institutions make the effort to see companies in court?, 26 September 2006

[16] As Footnote 16

The class actions services specialist conducted a report which showed that this huge amount of money was neglected between 2000 and 2007.  With average settlements hitting heights of £54 million, and securities actions filings on the rise, GOAL believes investors and fund managers should be claiming their slice of the agreements.

“It is important that local authorities do not ignore their legal right to claim damages through class actions in the US courts,“ explained Stephen Everard, managing director at the GOAL Group.  “There are substantial amounts of money on the table for those authorities who participate in collective lawsuits. Some of our local authority customers have already received sizeable payouts from cases against Fannie Mae and Freddie Mac, for instance.”

Everard added that the Northern Ireland Local Governmental Officers Superannuation Committee, along with other pension funds, is currently leading the group of global pension funds in a US class action lawsuit against Lehman Brothers.

“Participating in class actions is increasingly viewed as part of fund managers’ responsibility to ensure that they are actively fulfilling their fiduciary duty to shareholders.  Shareholder litigation, where appropriate, is an effective tool to protect the long-term interests of a fund,” he concluded.

Sophie Baker

The European class action services firm said this should be a “wake-up call’’ to the UK public sector pension funds that are currently foregoing their legal right to claim damages through the US courts.

With average settlements sitting at some $54m, and filings again on the rise, it said investors and fund managers should be claiming their slice of the pie.

The firm added the typical share portfolio of a large UK local authority pension fund had become strongly international – some holding as much as 15% foreign shares.  It said this was driving shareholders’ awareness that they could be left out of securities class actions in the US unless they took an active role in a lawsuit.

West Midlands pension fund assistant investment manager Fiona Hardle said:  “We have been involved in numerous class actions over the years, varying in size, including Cable & Wireless and Federal Home Loan and have recovered over $500,000 to date.”

She added:  “All funds have the responsibility to ensure that they are actively fulfilling their fiduciary duty to shareholders and should encourage corporate management to behave honestly and responsibly.  All local authority pension funds should consider protecting their long term interests.”

GOAL Group managing director Stephen Everard it was the judgement of the legal profession that there was a clear duty of care for institutional investors to register claims on behalf of their clients and non-participation was costing investors dearly.

He said:  “UK local authority pension funds are slowly waking up to this and those who do not participate, risk being left behind.”

Meanwhile, latest research from the National Association of Pension Funds (NAPF) revealed the number of UK defined benefit (DB) pension schemes that had led participation in class action law suits had doubled in the past 12 months.

The trade body’s engagement survey showed the number of DB schemes worth more than £1bn ($1.8bn) never involved in class action had nearly halved from 28% in 2007 to 15% in 2008.

The findings also showed schemes who had been lead plaintiffs or active participates in class actions had increased from 10% in 2007 to 23% in 2008.

And the amount of pension funds involved in settlements also rose from 69% in 2007 to 73% in 2008.

Steven Dignall

Andreas Scholz

Davon enfallen 3.6 Mrd. USD auf europäishe Adressen, in der Regel institutionelle Anleger, die fremdes Geld verwalten wie die Anlagegesellschaften der Investmentfonds.  Fϋr die Europäer ergibt sich daraus immerhin ein Durchschnitt von 450 Mio.  verlorenen Dollar jährlich, die den Anlegern entgehen.  Damir stellt sich die Frage nach den Pflichten der Anlagegesellschaften und den Möglichkeiten der Anleger, von diesem Kuchen ein paar Scheiben abzuschneiden.

Die nach den Regeln des Investment-gesetzes arbeitenden Anlagegesellschaften (KAG) sind grundsätzlich verpflichtet, allen Ansprϋchen in Verbindung mit den von ihnen verwalteten Wertpapieren und sonstigen Anlagen nachzugehen.  So dϋrfen sie nicht einfach auf Dividenden oder Zinszahlungen verzichten.

Es bleibt ihnen aber immer ein gesisser Spielraum, wie sich am Beispiel Deutsche Telekom zeigen lässt:  Keine der großen deutschen Fondsgesellschaften hat sich den derzeit verhandelten Haftungsklagen angeschlossen, ihre Ansprϋche – wenn denn am Ende welche festgestellt werden – sind jetzt bereits verjährt.  Das denkbare Ergebnis ,,klagende Privatanleger erhalten Schadensatz, Fondsanleger schauen in die Röhre” wäte dennoch aller Wahrsheinlichkeit nach ein PR-Problem, weil genau hier der Ermessensspielraum eine zentrale Rolle spielt:  Die Entscheidung der Fondsverwalter der KAG muss den unsicheren Erfolg einer Schadenersatzklage gegen die entstehenden sicheren Kostenbelastungen abwägen.  Selbst die unverkennbaren massiven Interessenkonflikte der meisten KAG dϋrften daran kaum etwas ändern:  Die Geldverwalter gehören fastalle zu Bankkonzernen, die ihrerseits mit dem Emissionsgeschäft viel Geld verdienen, aber dabei auch Haftungsrisiken fϋr die Wertpapiere und die Prospekte eingehen.  Die DWS hat seinerzeit Aktien der Telekom aus den Börsengängen in die Depots ihrer Aktienfonds genommen.  Als Anspruchsgegner wäre die Konzernmutter Deutsche Bank AG kaum zu umgehen gewesen.  Da  ware die Klage erst recht eine heikle Sache.

Und selbst wenn es sich um eine Pflichtverletzung durch die KAG an dieser Stelle gehandelt haben sollte, haben die Anleger einen steinigen Weg bis zum Schadenersatz vor sich:  Sie mϋssen ihren Schaden nachweisen, zeigt der vereidigte Sachverständige Dietmar Vogelsang einen zentralen Schwachpunkt auf.  Zur Abgrenzung des Schadens muss praktisch taggenau nachgewiesen werden, wann der betreffende Fonds wie viele der infrage stehenden Papiere gehalten hat, weil sich genau danach auch der Schadenersatz bemessen wϋrde, den der Fonds annahmegemäßhätte eintreiben mϋssen.  ,,Genau an diese Daten kommt man in aller Regel nicht heran”, so Vogelsang.  Eine Klage ohne ausreichende Beweise bleibt sinnlos.

According to Goal Group, a class action services specialist, $12bn (£6bn, €8bn) was left on the table by investors between 2000 and 2007. Of this, $3.6bn is attributable to European investors, who may not have even been aware that lawsuits relating to their investments were launched, since they nearly all take place in the US. Other investors believe class action lawsuits are too expensive to participate in, even though services exist to collect class action money on a no-win, no-fee basis.

Stephen Everard, Goal managing director, points to tangible evidence that European investors are able to benefit from class action lawsuits as well as their US brethren. “Sacks containing 800 cheques for UK institutions from the WorldCom case have just arrived at our offices,” says Mr Everard. Those cheques are dispatched to fund managers, who are grateful to see a small return on an investment they had thought was worthless.

The average payout from a class-action is 14 cents per dollar of “recognised loss”, meaning that a UK fund manager who suffered a loss – the level of which is decided by a US judge – of $10m, could receive $1.4m in compensation. Fred Fox, a partner at US law firm Kaplan Fox, which specialises in securities fraud cases, says payouts can be even higher. “We have had a number of cases where we have been able to recover more than 50 per cent of the damages,” Mr Fox says.

On average, settlements are about $54m each. Not bad for simply signing up to a service that typically takes 10 per cent of the damages awarded.

And the signs are that this could be a productive time for new cases. The last big wave of class actions, around 2000, are currently being settled, with cases involving Enron, Lucent and AOL in their final stages or finished. But the current subprime crisis has thrown up a hatful of new cases, with the promise of many more to come. In 2007 alone, 32 subprime class actions were filed, mainly against mortgage companies and lenders that had allegedly improperly inflated the value of their mortgage books.

Cases have also been launched against UBS, Merrill Lynch, Bear Stearns and Citigroup. Mr Fox, who was involved in the case against Merrill Lynch’s former technology analyst Henry Blodget, says his firm is likely to be acting for litigants in upcoming bank cases. “There are several claims against large banks that have taken big writedowns,” says Mr Fox. “In essence, the claims are that the banks concerned hid their exposure to CDOs, subprime mortgages and other asset-backed securities. Some of the major monolines [single line insurers] such as Ambac and MBIA are also subject to claims.”

In addition, the impact of Sarbanes-Oxley is still being felt. The Act’s stringent requirements on transparency and reporting open the door to more class actions. The European Union’s Mifid directive in Europe could create a similar effect.

But Mr Everard points out that European investors are in danger of missing out on the class action bonanza. “With US investors leading the litigation, European investors need to actively seek inclusion. For US investors, the inclusion of European investors means a smaller cut of any settlement – and the accompanying legal complexities can slow down the process.”

The risks of missing out have been heightened by diversification in institutional portfolios. While 75 per cent of shares are held in domestic companies, a considerable 25 per cent are now in foreign companies. Mr Everard warns that pension firms and investment firms should be acting in the interests of their clients. “Many observers will say there is a clear duty of care for institutional investors to register claims on behalf of their clients. But our research shows that non-participation is costing investors dearly.”

Of course, any investor signing up to the kind of service that Goal offers can expect a long wait to hear any good news. Of the 235 federal actions filed in 2000, 90 per cent have reached some form of resolution – 60 per cent have been settled and 30 per cent dismissed. But some still have further to go – eight years down the line.

European investment managers have to make a modest commitment of time and resources to join in class actions. Goal requires them to hand over trading data dating back to 1999, which is then scoured for relevant cases. When they are identified, Goal provides legal advice, tracks the class actions and finally recovers the money.

However, the idea of handing over trading data does not please everyone. Mr Everard says: “Hedge funds are loathe to do this because they think someone might work out their trading strategy.” Those that muster the confidence to take part in class actions might, possibly, add sufficient returns on their assets to pass a high water mark, or avoid a drawdown.

At the same time, however, investors need to bear in mind that not every loss is recoverable. Mr Fox says a sharp fall in a company’s share price is not usually enough to trigger a class action, despite the appearance of wall-to-wall litigation activity in the US.

“In order to have a claim, even in the US, you have to be able to allege – even before any discovery takes place – that whatever caused the share price drop was fraud-related,” says Mr Fox.

GOAL Group, a withholding tax and class action service specialist in Europe, said its research showed that between 2000 and 2007 institutional investors’ non-participation in cases resulted in nearly $12bn being left on the table.

It said some $3.6bn of this could be attributed to European investors.

Stephen Everard, managing director, GOAL Group, commented: “It is the judgement of the legal profession that there is a clear duty of care for institutional investors to register claims on behalf of their clients, but our research shows that non-participation is costing investors dearly.

“It is true that participating in a class action requires timely and accurate information about the relative merits and procedural processes, and time and resources to review and evaluate relevant settlement provisions.

“Investors must then cross-reference these outputs against extensive individual trading activity data and compile and submit the often complex paperwork necessary to make a valid claim.

“But outsourced, automated services are available on the market to process class action claims without incurring high expense.”

GOAL Group said, in the absence of established mechanisms for joint actions in other legislatures (with the notable exception of Australia), class actions in the US courts were being used successfully by some European shareholders to seek redress for their losses.

However, it said when US investors controlled the litigation there was an increasing possibility that foreign investors might not automatically be included, because the fewer the claimants, the greater the cut of any settlement; and legal complexities could slow down the process.

This has inspired European companies to become active litigants in US courts in cases against European and US companies, according to GOAL Group.

A report from Goal Group shows that between 2000 and 2007 institutional investors’ non-participation in US securities class actions resulted in nearly $12bn (£6bn) being left on the table.

Some $3.6bn (£1.85bn) of this is attributed to European investors.

The company is urging investors and fund managers to stop ignoring “the opportunity to claim damages to which they are legally entitled”.

Managing director Stephen Everard said:  “It is the judgement of the legal profession that there is a clear duty of care for institutional investors to register claims on behalf of their clients, but our research shows that non-participation is costing investors dearly.”

Goal Group said UK shareholders are becoming more involved with US class actions – which on average have settlements of around $54m (£27m) – but it is a complicated process.

Everard said:  “The typical European share portfolio has become strongly international – the average balance is currently in the order of 75pc domestic shares, 25pc foreign shares – and this is driving European shareholders’ awareness that they could be left out of securities class actions in the US unless they take an active role in a lawsuit.

“However, it can be a complicated and daunting task – and many institutional investors believe that the cost and time involved is likely to outweigh the benefits.

“This is often a misapprehension, but perhaps explains why 25pc of claims that could be filed by entitled parties are left unprocessed.

“There is an urgent need [indeed, legal obligation] for institutional investors to make claims on behalf of their clients.  And since there are no low-cost services which are already enabling many financial organisations to do so, there remains no excuse for ignoring this important client responsibility.”

UK institutional investors that do not take part in US class action settlements are losing out on millions of pounds from settlements, a specialist warns.

A report from Goal Group shows that between 2000 and 2007 institutional investors’ non-participation in US securities class actions resulted in nearly $12bn (£6bn) being left on the table.

Some $3.6bn (£1.85bn) of this is attributed to European investors.

The company is urging investors and fund managers to stop ignoring “the opportunity to claim damages to which they are legally entitled”.

Managing director Stephen Everard said:  “It is the judgement of the legal profession that there is a clear duty of care for institutional investors to register claims on behalf of their clients, but our research shows that non-participation is costing investors dearly.”

Goal Group said UK shareholders are becoming more involved with US class actions – which on average have settlements of around $54m (£27m) – but it is a complicated process.

Everard said:  “The typical European share portfolio has become strongly international – the average balance is currently in the order of 75pc domestic shares, 25pc foreign shares – and this is driving European shareholders’ awareness that they could be left out of securities class actions in the US unless they take an active role in a lawsuit.

“However, it can be a complicated and daunting task – and many institutional investors believe that the cost and time involved is likely to outweigh the benefits.

“This is often a misapprehension, but perhaps explains why 25pc of claims that could be filed by entitled parties are left unprocessed.

“There is an urgent need [indeed, legal obligation] for institutional investors to make claims on behalf of their clients.  And since there are no low-cost services which are already enabling many financial organisations to do so, there remains no excuse for ignoring this important client responsibility.”

Some USD3.6bn of this can be attributed to European investors.

According to GOAL, around the millennium, corporate governance scandals such as Enron were the main instigators of class actions, but the mantle has now passed to the subprime mortgage market crisis.

With average settlements sitting at some USD54m, and filings again on the rise, investors and fund managers can no longer ignore the opportunity to claim damages to which they are legally entitled, the Group argued.

In the absence of established mechanisms for joint actions in other legislatures (with the notable exception of Australia), class actions in the US courts are being used successfully by European shareholders to seek redress for their losses.

When US investors control the litigation, there is a possibility that foreign investors may not automatically be included, because the fewer the claimants, the greater the cut of any settlement; and legal complexities can slow down the process.

This has inspired European companies to become active litigants in US courts – in cases against European and US companies. In the Parmalat case, all of the lead plaintiffs are European.

According to GOAL, the typical European share portfolio has become strongly international – the average balance is currently in the order of 75% domestic shares, 25% foreign shares – and this is driving European shareholders’ awareness that they could be left out of securities class actions in the US unless they take an active role in a lawsuit.

However, it is a fact that keeping track of the opportunities to make a claim, and the processes required to do so successfully, can be a complicated and daunting task – and many institutional investors believe that the cost and time involved is likely to outweigh the benefits. This is often not the case, but perhaps explains why 25% of claims that could be filed by entitled parties are left unprocessed.

Stephen Everard, Managing Director, GOAL Group, argued that:

“It is the judgement of the legal profession that there is a clear duty of care for institutional investors to register claims on behalf of their clients, but our research shows that non-participation is costing investors dearly.”

“A downturn in filings in 2006 raised the possibility that shareholder class actions were on the wane. The figures from 2007, however, give this the lie, as we have seen renewed vigour in the courts and an overall increase in filings over 2006.”

“Although the Sarbanes-Oxley Act and European equivalents are undoubtedly suppressing the possibility of further Enrons and Parmalats, new factors have arisen in the financial and corporate markets where class actions are being used to try and claim compensation for shareholders and investors.”

“We are currently seeing a surge of class action lawsuits inspired by the international credit crisis, the resolution of which will take anywhere between five and seven years.”

Pension funds are missing out on a potential share of $12bn (£6bn) in unclaimed litigation settlements in the USA, according to a class action specialist.

A study by GOAL Group found class action cases carried out between 2000 and 2007 amounted to $3.6bn (£1.8bn) in unclaimed settlements for European investors, with around 25% of this figure attributed to UK investors.

Stephen Everard, managing director of GOAL Group, said despite the large amount going unclaimed, there had been a significant growth in interest from UK local authority pension funds in pursuing litigation to recoup losses.

“I think getting into litigation with overseas companies has probably been outside of the traditional thinking for some local authorities. But since the Bath and North Somerset and North Yorkshire pension funds teamed up in a class action, things have started to move forward. More are starting to recognise the sheer enormity of the money that is out there,” said Everard.

“The advantage of being a lead plaintiff is that you can dictate the class period and can get three or four times more than other participants in the case, so you can have some influence. Some are more proactive than others and they recognise that there is something they should be doing.”

Everard said eight local authorities had either signed up or come to his company expressing an interest in pursuing class action litigation, with many realising it is part of

their fiduciary duty to file claims on behalf of investors. He said the Avon pension fund’s role in becoming lead plaintiff against GlaxoSmith-Kline, has had an influence on other local authorities.

“A UK authority may be concerned that it is an admission of investing in the wrong company, but I think in the Bath and North Somerset case, there is a positive kudos in being lead plaintiff, as undoubtedly a large number of other investors will have shares in GlaxoSmithKline.”