The investor action landscape has changed quite dramatically in the last few years, with now fewer remedies available to international investors in the US courts (post the US Supreme Court’s Morrison ruling in 2010), but many more remedies available in a wide range of other jurisdictions across the world. As a result, not only are institutional investors now routinely and regularly impacted by shareholder action processes in the US, but they are also affected by different legal restitution processes in many other jurisdictions. The corresponding financial recoveries for investors globally have also increased, adding to the pressure on institutional investors to ensure they have a robust and comprehensive investor action recovery process in place across all relevant territories. Investors have become much more exposed when they miss eligible payments or don’t join the right case on the right terms.
While some jurisdictions follow the Opt-Out process that we have seen for decades in the US and which largely requires administrative work post-litigation, most have an Opt In litigation process that requires due diligence and a legal decision to join a case before it is filed if any financial recovery is to be seen. Enthusiasm for investor restitution processes from a growing pool of institutional investors, on the one hand, and litigation funders and interested law firms on the other, means many more cases being proposed in numerous jurisdictions. Where in the past we might have seen a couple of competing cases on offer, it is now routine to see 8-10 competing cases, each with its own strategy for recovery, legal and funding team, structure, risks and cost profile. The dramatic increase in cases available for investors to join, and with each requiring a certain book-build of combined investor loss to get off the ground, means that funders and law firms are marketing their cases harder. This adds to the press coverage of cases, but only makes it harder for an investor to see the full picture clearly and completely and to select the right case.
The added complexity of financial antitrust cases with their high value settlements and challenging administration processes has further added to the workload of institutional investors, the majority of whom recognise that they have a duty to understand the impact of all the various investor actions on their investments and to pursue recoveries, particularly where funds are managed on behalf of clients or beneficiaries. Despite continued corporate governance reform and regulator fines, there is certainly no shortage of investor action cases being brought globally and with the increase in interest from investors, law firms and funders alike, this will only increase.