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An international study has named Australia as a front runner to become a regional centre for securities class action litigation.

Read more here…

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Over the last few years it has become clear that fund managers and custodians have a fiduciary duty to ensure that their clients participate in securities class actions that may recoup some of their investment losses. Back in 2005, over 40 mutual fund managers were reportedly sued by shareholders of those funds in class action lawsuits alleging that the funds failed to collect as much as USD 2 billion in settlement payouts to which the funds’ shareholders were entitled1. The lawsuits claimed that the funds’ failure to attempt to recover this money during the class period was a failure of fiduciary duty, was negligent, and violated the Investment Company Act of 1940. The lawsuits were seeking damages for all of the money allegedly left on the table, as well as damages and the forfeiture of all commissions or fees paid by fund shareholders.

Goal Group Report on Non US Class Actions April 2013

In this week’s news, the Lloyds Banking Group has “narrowed its pre-tax losses for 2012 to £570m from £3.5bn the previous year.” Forty per cent of the company is owned by the government.

The group also said that “its losses were primarily because of making provisions of £3.6bn for the mis-selling of payment protection insurance.”

Tax Reclamation is now essential

After the passing of the Foreign Account Tax Compliance Act in the U.S., foreign financial institutions are increasingly looking for help and services in reporting income and investments for US citizens.

This makes tax reclamation and claim filing services essential. Michael Bancroft, a CPA in Wilmington, Delaware, comments that “the importance of effective tax reclamation on cross-border securities earnings is ripe.”

Goal Group can help

Goal Group, located in London, focuses on a variety of services for a wide range of companies. One of their services is withholding tax solutions including GTRS, GOAL TaxBack, Tax Guru, and GDMS.

Their own research has even shown that “in excess of $10 billion of withholding tax remains unclaimed each year by the rightful owners and beneficiaries.”

Their solutions facilitate the reclamation of circa $11 billion per annum. They assist their clients to benefit from relief at source wherever practicable and possible to do so.

A class action lawsuit is filed on the part of a number of individuals who happen to have been in some way damaged by the activities of a company. It is common to find class action lawsuits filed by employees of the corporation if hiring or even wages procedures appear to have been illegitimate. Another variety is the class action lawsuit filed against a drug company for making illegal claims about their product, or even for resulting in fatalities or bodily damage to individuals taking the substance.

Whenever one subscribes a class action suit, one usually has to sign documents declaring that he or she then forfeits the right to claim damages to the corporation as a particular person. A good class action law suit honours damages to the plaintiffs, who are all those suing the firm, in accordance to biggest cause damage. In most all cases not all members of the litigation are entitled to equal compensation. Usually the lawyers operate on a contingency basis, which means that they are going to get a portion from the designation. On the other hand, they won’t charge their clients any fees if the suit isn’t successful. That percentage could be substantial, between 30 to 50 per cent from the total award.

Awards from a class action lawsuit are split directly into 2 amounts: punitive and compensatory damages. Compensatory damages are meant to tackle the defendants (those being sued), and direct injury. These funds are going to be used to tackle actual damages inflicted by the defendants, such as illness, loss of life, or pain and suffering. Punitive losses from the class action lawsuit are a form of penalisation for the corporation committing illegal behaviours, or inflicting damage. Punitive damages in large class action lawsuits can be particularly high, whenever it is demonstrated the corporation has demonstrated great disregard for the wellness, safety or emotional wellbeing of the victims.

Class actions may become jury trials, or perhaps may be resolved prior to a trial. A suit can be tried in directed mediation. Settlements and negotiation mean that injuries are agreed upon by the defendant/s. Jury trial class action lawsuits can create problems because a corporation levelled with heavy punitive and compensatory damages can appeal the decision. The appeal process may go on for several years, so plaintiffs might have to hold on a long time prior to seeing any money. Corporations can also declare insolvency, which means the plaintiffs may never be awarded anything.

One of the most well-known class action lawsuit is explored in the film Erin Brockovich. The film is a biopic detailing the class action suit on behalf of the residents of Hinkley, California. They sued Pacific Gas and Electric (PG&E) for lying about using the chemical hexavalent chromium, which then seeped into the ground water and contaminated the water supply. Many residents of Hinkley then became ill with cancer, or had fertility problems. As well, animals living in the small town died quickly.

The suit’s lawyer Ed Masry was able to establish that PG&E knew about the situation and deliberately risked the lives of those living near the power plants by failing to warn the residents. Erin Brockovich, played by Julia Roberts in the film, extensively researched and documented the damages caused to Hinkley residents. Her dedication helped secure the successful verdict against PG&E. Ed Masry chose directed mediation for the class action lawsuit, meaning those severely affected by exposure to chromium were given immediate monetary relief.

29 January 2013

A new forecast study from GOAL Group, the leading global class action services specialist, predicts that settlements in securities class actions outside the U.S. will rise to USD 8.3 billion per year by 2020.  GOAL Group’s study also identifies that if non-participation rates seen in U.S. class actions are experienced in non-U.S. activity, by the end of the decade USD 2.02 billion of investors’ rightful returns will be left unreclaimed each year.

Furthermore, the report also warns that because non-U.S. legislatures require participants to register at the beginning of a case, investors need to participate now to receive their rightful returns.  Any level of non-participation presents fiduciaries, such as fund managers and custodians, with a potential legal risk.  Experience in the U.S., along with emerging contractual obligations, suggests that fiduciaries may be sued if they do not ensure investors participate in class actions to recoup a proportion of their investment losses.

This is a wake-up call to fiduciaries, as growth in non-U.S. collective actions and evidence that some custodians are restricting the geography of their class action service level, indicate that non-participation rates are likely to be at least at current U.S. case levels, and probably considerably higher.  Moreover, evidence is emerging that funds are now including the responsibility for class action identification and participation in contractual agreements with their custodians.

Stephen Everard, CEO, GOAL Group, comments, “Until recently, the main focus of securities class actions was on the U.S. as the most developed legislature in this respect.  However, class action growth outside the U.S. is now increasing rapidly, and is predicted to mirror the growth of the U.S. class action scene in the early part of the 21st century.  The root of this international diversification seems to have been a combination of restrictions on jurisdiction definitions in the U.S. Federal courts, along with a growing desire to develop domestic class action procedures in many countries around the globe.  Moreover, certain legislatures – currently The Netherlands and Canada – have defined and admitted the idea of a global ‘class’ where non-U.S. investors in shares listed on a non-U.S. exchange can pursue their securities class actions in those countries’ courts.  There is no viable excuse for non-participation as a number of specialist service providers can now perform this function at relatively low cost.”

Methodology
Predicted annual settlement volumes for non-U.S. legislatures have been modelled through to a forward date of 2020, the end of the decade.  Using GOAL’s proprietary data and insights, combined with corroborative third party sources, the model utilises the U.S. class actions experience to estimate the size of annual settlements in other world markets after a further eight years of class actions development in these countries and in legislatures that accept international plaintiff representation and reparation.  GOAL’s predictive model adopts a conservative positioning, factoring out the major peaks of settlement values seen in the U.S. experience to date.

www.goalgroup.com


About GOAL Group Limited (GOAL)
Established in 1989, GOAL is the leading class actions and tax reclamation services specialist.  Goal has a truly blue-chip client base including many of the world’s largest global custodians, asset managers, private banks, pension funds, hedge funds, high net-worth individuals, investment banks, prime brokers and fund managers spread widely across Europe, the United States and the Far East. 

GOAL’s class actions service is provided via the wholly-owned subsidiary Goal Global Recoveries Limited (“GGRL”) and 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 losses, and is currently working on an estimate of unreclaimed losses for 2008-11 

In the tax reclamation field, GOAL’s flagship product GTRS (Global Tax Reclamation System) – available as installed software or as an outsourced service – helps custodians reclaim tax on income from cross-border securities that has been overwithheld by foreign governments based on international Double Taxation treaties. This is delivered to global financial institutions, including 5 of the world’s top 10 custodian banks.

Image for UK pension funds expected to increase claims through class actions

A leading class action specialist predicts that, with an increase in the amount of pension funds claiming back lost investments, settlements in securities class actions outside the US could rise to $8.3bn per year by 2020.

Class action specialist GOAL Group predicts that settlements in securities class actions outside the US will rise substantially. Up to very recently pension funds only focussed on claiming back lost investments in the US, as this was the market with the most developed legislature. However, pension fund trustees, and their custodian banks, have a fiduciary duty to recover beneficiary returns from class actions, and more and more funds will have this added as a clause in their contract, forcing them to seek legal solutions in many other nations across the world.

The root of this international diversification seems to have been a combination of restrictions on jurisdiction definitions in the US Federal courts (for example the Morrison v. National Australia Bank ruling), along with a growing desire to develop domestic class action procedures in many countries around the globe.

A worrying fact, however, in the new study by the legal consultants identified that if non-participation rates seen in US class actions are experienced and continued in non-US activity, by the end of the decade USD 2.02bn of investors’ rightful returns will be left unclaimed each year.

In the UK, pension funds currently account for 38% of total assets under management – an estimated 1.6tn (according to the 2011-2012, IMA Annual Survey). On average 40% of these funds portfolio is invested in foreign stocks, of which only 11% is invested in US stocks.

GOAL says the awareness of what is lost out on, on an annual basis, should be a wake-up call to fiduciaries. Especially now that funds are seen to be including the responsibility for class action identification and participation in contractual agreements with their custodians, these need to be seen trying to recoup the investment losses in order not to be sued. Some custodians though are restricting the geography of their class action service level, which could indicate that non-participation rates are likely to be even higher than at current US case levels.

Stephen Everard, CEO of the GOAL Group, said the excuses of not participating in class action lawsuits was slowly disappearing: “Until recently, the main focus of securities class actions was on the US. However, class action growth outside the US is now increasing rapidly, and is predicted to mirror the growth of the US class action scene in the early part of the 21st century.

“Certain legislatures – currently The Netherlands and Canada – have defined and admitted the idea of a global ‘class’ where non-US investors in shares listed on a non-US exchange can pursue their securities class actions in those countries’ courts. There is no viable excuse for non-participation as a number of specialist service providers can now perform this function at relatively low cost.”

The UK is also one of the jurisdictions where US-style securities litigation is developing, along with Germany, The Netherlands and Canada, where a framework is already in place. GOAL says it is “quite possible” that the UK could become a regional centre for the prosecution of these cases.

First published 01.02.2013

monique_simpson@wilmington.co.uk

Les sociétés Capfields et Goal viennent de créer une coentreprise travaillant au recouvrement de fonds suite à des décisions de justice. Une spécialisation financière qui colle plus que jamais à l’actualité.

Louis de Laromiguière, associé chez Capfields, est à l’origine de la coentrepris

Il y a d’abord eu Lifemark, un fonds de titrisation autrefois coté à la Bourse de Luxembourg et mis en liquidation depuis mai 2012. Ses dizaines de milliers d’investisseurs sont aujourd’hui progressivement remboursées par le programme de compensation des services financiers britanniques. Il y a ensuite eu, en novembre de l’année dernière, cette décision de justice condamnant l’ancienne filiale luxembourgeoise de Dexia (aujourd’hui la Banque internationale à Luxembourg) à verser 75.000 euros à un investisseur français d’un fonds madoffé pour avoir manqué dans son devoir de communication. Un jugement qui pourrait en appeler bien d’autres, et éventuellement en class action…

Ces deux cas de déconvenues financières ayant impliqué des indemnisations représentent une goutte d’eau dans l’océan de créances non recouvrées. Ils concernent certes le Grand-Duché, mais ils s’inscrivent surtout dans une longue liste au niveau international. Sur le seul marché américain, 19 milliards de dollars resteraient depuis 10 ans non réclamés. Pourtant, ils sont à la disposition des investisseurs suite à des décisions de justice.

« Récupérer l’argent »

C’est ce que fait valoir Louis de Laromiguière, associé de la société Capfields qui vient de créer, avec le groupe londonien Goal, une coentreprise spécialisée dans le recouvrement international de liquidité ou « Global cash recovery ». L’idée de cette niche, explorée par ce consultant travaillant généralement sur les processus opérationnels, est d’offrir à des sociétés financières un service de screening des portefeuilles des investisseurs pour évaluer ce à quoi ils peuvent prétendre en termes d’indemnités judiciaires. Celles-ci émanent de condamnations de sociétés distribuant des titres cotés disponibles auprès d’agents payeurs. « Nous allons récupérer cet argent », indique simplement Louis de Laromiguière.

Mais ni la joint-venture, ni Capfields, ni Goal n’ont de service juridique. Ils gèrent uniquement des sources d’informations donnant accès aux décisions de justice. La société londonienne dispose d’un maillage international de plus de 600 sources consultées régulièrement. Leur structure informatique automatise alors l’identification des sommes recouvrables pour l’investisseur, génère les demandes de remboursement (spécifiques à chaque pays couvert) et effectue le suivi avec l’agent payeur. Selon l’associé de Capfields, Goal a récupéré depuis 2007 plus de 250 millions d’euros. La société surveille au quotidien 9.000 milliards d’euros de valeurs de titres à Londres.

Marché des class actions

Avec cette joint-venture, opérationnelle depuis janvier, de nouveaux marchés de « class action » sont servis. La Belgique, la Nouvelle-Zélande, les pays scandinaves et l’Australie en font partie. Elle travaille d’ailleurs déjà avec de grands noms bancaires. Capfields, bras commercial de Goal sur ce produit, s’adresse ainsi aux fonds ou aux banques avec l’argument selon lequel souscrire à ce service (coût fixe plus commission sur montants recouverts) pourrait rassurer encore le client… alors que les régulations AIFM et Ucits imposent toujours plus de responsabilités aux acteurs du marché, à commencer par les banques dépositaires.

Pour l’heure, la coentreprise n’implique rien de concret au Grand-Duché – elle n’a même pas de personnalité juridique – si ce n’est des jours/hommes. Mais il n’est pas exclu que l’infrastructure informatique – aujourd’hui à Londres – s’y installe à moyen terme. Le cas échéant, une poignée d’emplois sera créée.

Recherche de cross-selling

La société luxembourgeoise Capfields, spin off de Trasys, compte en tout cas sur ce service de global cash recovery pour accroître sa notoriété et vendre sur la place financière ses autres compétences en modélisation opérationnelle. Son produit Fastca, censé fournir une solution informatique à la nouvelle réglementation américaine (Fatca) visant à rapatrier les évadés fiscaux aux États-Unis, titillera certainement la curiosité de certains établissements du secteur.