Key Takeaways

• A securities fraud claim requires a false or misleading statement about something that mattered to investors, made by people who knew or recklessly ignored the truth, followed by a loss when the truth came out.
• The case covers a class period: the time between the first false statement and the disclosure that corrected it. Investors who bought during that period are the class.
• Any class member can ask to be appointed lead plaintiff, but the request is due within 60 days after notice of the case is published.
• You do not pay out of pocket to be a class member. Attorney fees in a class action are set by the court and paid from the recovery.

What Counts as Securities Fraud

The federal securities laws require public companies to tell investors the truth about their business. A claim arises when a company or its executives make a statement that is false, or leave out a fact that makes what they said misleading, and investors lose money as a result. Common examples include:

• Overstated revenue or earnings, and financial statements that later have to be restated.
• Hidden problems with a key product, a drug trial, a major customer or a regulator.
• Sales or growth forecasts the company had no basis to make.
• Risks that had already come to pass but were described as only possible.
• False or incomplete statements in the registration statement or prospectus for an initial public offering or a later stock offering.
• Undisclosed dealings between the company and its own insiders.

A falling stock price is not fraud by itself. Businesses fail and markets drop for honest reasons. The question is whether the people in charge knew something investors were not told.

How a Securities Class Action Works

Most securities fraud cases are brought as class actions because thousands of investors were harmed in the same way by the same statements. The case moves through these steps:

• Complaint and notice. An investor files a complaint. A notice is then published telling other investors that the case has been filed and that they may ask to lead it.
• Lead plaintiff. Within 60 days of that notice, any class member may ask the court to be appointed lead plaintiff. The court generally appoints the investor with the largest financial stake who can fairly represent the class.
• Motion to dismiss. The company will ask the court to throw the case out. The complaint must state specific facts showing the statements were false and that the defendants knew it.
• Discovery and class certification. If the case survives, the parties exchange documents and testimony, and the court decides whether the case can proceed for the whole class.
• Settlement or trial. Most cases that survive dismissal settle. A settlement must be approved by the court, and class members receive notice and a chance to object.
• Claims process. To be paid from a settlement, a class member must file a proof of claim with trading records. Many investors who are entitled to money never file. We make sure our clients do.

Lead Plaintiff or Class Member

You do not need to be lead plaintiff to share in a recovery. The lead plaintiff directs the case, chooses counsel with the court’s approval, and decides with counsel whether to settle. In return, the lead plaintiff has duties to the whole class and must be available to give documents and testimony.

If your loss is large, serving as lead plaintiff, or filing your own action outside the class, may be worth considering. See our page on direct and opt-out actions. If your loss is smaller, the right step is usually to confirm that you are in the class, keep your records and file a claim when the time comes.

How Losses Are Measured

Your loss in a securities case is not simply what you paid minus what the stock is worth today. The law measures the part of the price drop caused by the fraud, and it limits damages using the average trading price in the 90 days after the corrective disclosure. Shares sold before the truth came out may not count at all. We calculate your recognized loss before advising you on how to proceed.

Deadlines

A federal securities fraud claim generally must be filed within two years after the facts are discovered and no later than five years after the violation. Claims over a false registration statement must generally be filed within one year of discovery and no later than three years after the offering. The 60-day lead plaintiff deadline runs from the published notice and is not extended.

What Our Firm Does

• Review the company’s filings, press releases and the timing of your trades.
• Calculate your loss under the method the courts apply.
• Advise you on whether to seek lead plaintiff status, remain in the class or file separately.
• Prepare the lead plaintiff motion and the certification the court requires.
• File and follow your proof of claim in any settlement.

Who We Help

• Individual investors and retirees who bought a stock before bad news broke.
• Trustees and executors holding stock for a trust or an estate.
• Business owners and retirement plans with losses in publicly traded securities.
• Employees who received company stock and held it through a collapse.

Frequently Asked Questions

I saw a notice about a class action against a company whose stock I own. What should I do?

Check whether you bought the stock during the class period stated in the notice, and gather your trade confirmations. If you want to lead the case, you must act before the lead plaintiff deadline in the notice. If not, you generally remain a class member without doing anything, and you will need to file a claim if the case settles.

Do I need to still own the stock?

No. What matters is that you bought during the class period and held at least some shares when the truth was disclosed. Investors who sold after the price dropped can recover.

How much can I recover?

It depends on how many shares you bought, the prices you paid, when you sold, and how much of the drop the fraud caused. Class settlements usually return part of the recognized loss, not all of it. We will calculate your loss before you make any decision.

Will I have to pay anything?

Class members do not pay out of pocket. In a class action, attorney fees and costs are approved by the court and paid from the recovery.

Can I be part of the case if I live outside the United States or bought through a retirement account?

Purchases on a United States exchange are generally covered wherever you live, and shares held in an IRA or other retirement account count. Shares held through a mutual fund are different, because the fund is the purchaser.

Find Out Where You Stand

Email msiddons@siddonslaw.com with the name of the company, the dates you bought and sold, and your approximate loss. We will reply with the list of documents we need and tell you which deadlines apply.