Why Should Institutions Get Involved?
- Institutional fiduciaries oversee the financial security of their funds. As such, they must take reasonable steps to monitor all real and potential claims arising from fraud and malfeasance by corporate wrongdoers.
- Institutional investors account for a significant portion of all cases filed. A 2012 study by PriceWaterhouseCooper indicated that approximately 42% of the lead plaintiffs in all cases filed in 2012 were institutional investors.
- Institutional investors are more likely to achieve better results. Since the passage of the Private Securities Litigation Reform Act of 1995 – which specifically encouraged institutional investors to participate as lead plaintiffs in securities class actions – settlement recoveries have increased dramatically.
- Cases with an institutional investor as the lead or co-lead plaintiff are less likely to be dismissed and more likely to either settle or reach a ruling on summary judgment. According to the Securities Class Action Filings—2013 Mid-Year Assessment by Cornerstone Research, only 35% of cases with an institutional investor serving as either the lead or co-lead plaintiff were dismissed, compared to 42% of cases with a non-institutional investor serving as the lead plaintiff.
- According to the January 2013 NERA Report, 64% of the settlements reached in 2012 involved an institutional investor as the lead plaintiff. According to a 2012 study by PriceWaterhouseCooper, institutional investors recovered a total of approximately $4 billion via settlements in 2012.
- Cases with an institutional investor as a lead plaintiff achieve higher settlements. According to the January 2013 NERA Report, even when accounting for other factors such as the size of investor losses, securities class actions where the lead plaintiff is an institutional investor settle for more. When the institutional investor is a public pension fund, the settlements tend to be even greater. According to the SCAS Top 100 Settlements Semi-Annual Report, as of the end of 2012, 87 out of the top 100 settlements, between 1996 and the first half of 2013, involved an institutional investor as a lead plaintiff.
- Institutions typically are able to negotiate larger settlements while simultaneously lowering attorney fees, both of which increase recoveries for investors.
- Institutions frequently bring a certain level of sophistication and experience to each case which often proves to be an asset in developing litigation and trial strategy or negotiating a settlement.
- Institutional investors are better able to obtain extensive and significant corporate governance reforms, such as:
- Mandate annually elected Boards controlled by independent directors;
- Separate Chairman of the Board and CEO offices;
- Require that at least two-thirds of the Board shall be independent directors;
- Require immediate public disclosure of all sales or purchases of a company’s stock by any corporate officer or director;
- Establish director term limits;
- Limit the number of boards a director may sit on;
- Eliminate “super-voting” classes of stock;
- Restrict/limit stock options;
- Rotate outside auditors; and
- Limit executive compensation.
How Can Institutions Get Involved?
The best way for institutional fiduciaries to protect their investments and to maximize the recovery of lost assets is to actively monitor market developments. Recognizing that this is a time consuming and expensive process, Kessler Topaz offers a monitoring service designed to enable institutions to identify important events in the marketplace and discuss what effect, if any, those events have on their investments. Kessler Topaz will discuss the merits of claims filed as well as potential claims, and evaluate all legal rights and options for recovery. This service allows institutional investors to efficiently assess all claims and to take any steps necessary to protect assets, without disrupting their business. There is no cost or obligation for this service and Kessler Topaz handles all class actions on a fully contingent basis. Kessler Topaz is only paid if the litigation is successful and, win or lose, Pennsylvania law allows for the responsibility for all costs and expenses to rest with us.
Kessler Topaz assists shareholders in improving corporate governance through direct action, including bylaw amendments, director nominations, and other means by which shareholders can assert direct and substantial influence on the composition and functioning of boards of directors. Kessler Topaz also works closely with leading corporate governance experts, organized labor, and other shareholder advocates to promote public policies that compel or encourage corporations to adopt corporate governance measures that serve the interests of shareholders.