Litigation Recovery Company Expands on Global Rise of Shareholder Class Action
Shareholder class actions have increased globally, especially in Australia.
October 23, 2019 at 02:29 PM
5 minute read
Litigation recovery company Financial Recovery Technologies (FRT) is continuing its global expansion, as activity in shareholder class actions outside the U.S. gathers steam.
The U.S.-based company monitors shareholder litigation for investment funds and alerts them to class actions from which they might benefit. It also advises the funds about the best course of action to make their financial recovery.
While the U.S. has long been a strong market, expansion to jurisdictions outside the U.S. has come as shareholder litigation has increased overseas, said FRT chief executive Rob Adler.
"What's really happened in the last decade has been a dramatic increase in litigation outside of the United States," he said. "The trend here is clearly one where the market is very dynamic, definitely growing. Increasingly, we're seeing more and more law firms and more and more investors turning their attention to this."
Australia has become a particularly active market.
"It's really – outside of the United States – the most dynamic market in litigation today," he said.
When FRT first entered the Australian market in late 2014, it was primarily to help Australian fund managers track offshore litigation related to their own holdings, which have grown much larger because of the country's quarter-century-old compulsory retirement savings regime.
But Steven Longley, head of corporate development, APAC and strategic accounts, said litigation within Australia has increased to the extent that FRT is also kept busy monitoring local class actions. Last year's government-initiated Royal Commission into misconduct in Australia's banking and financial services sector has further increased class action activity.
FRT is currently tracking more than 35 different actions involving businesses such as the Commonwealth Bank of Australia, fund manager AMP and mining giant BHP.
But growth is not just occurring in Australia. The firm said it has a presence in Australia and London and has clients on every continent, as securities class actions spread to more jurisdictions.
"Generally speaking, all capital markets and all jurisdictions that are looking to attract capital are currently increasing shareholder protections. I think, if anything, we're seeing substantial activity in almost every active capitalist market," Adler said. "You're even starting to see some percolation of plaintiff rights and litigation rights in China, which has obviously been one of the markets that have been most challenging for people to impose the rule of law."
The increasing amount of global litigation has made the task of monitoring shareholder class actions for which funds might be eligible much more difficult.
"The reality of it is that, oftentimes, our clients are unaware even that these opportunities exist for them. We bring it to their attention and, beyond bringing it to their attention, we then help them through the choices that are involved in executing their recovery strategy," Adler said.
Sometimes that can be as simple as completing and filing a claim form. In other instances, it's evaluating the various options available to them in litigation and which law firms might be best to work with.
At one point in the Volkswagen class action, 15 different law firms were pitching to represent corporations. "How do you figure out which of the 15 flavours of ice cream to select?" Adler said. "Our goal is to cut through the marketing and the aggressive tactics by the law firms that are only trying to do their job and try to help our clients make the best decisions."
Globally, about $10 billion in proceeds of securities class actions is available to shareholders each year, according to the company.
Founded in 2008 and headquartered in Medford, Massachusetts, privately held FRT does not release any financial details, but Adler said it is profitable and has about 100 employees.
The company has up until now mostly advised investment funds and is planning to expand its services to individual shareholders. In the U.S., it is partnering with large brokerage firms to offer its services via the brokerage's platforms to alert individual shareholders of their possible entitlements.
"They often have a much bigger hurdle to climb to participate in these settlement pools," Adler said. "We can't get people more than they deserve, but we can get them exactly what a big guy would get."
The cases FRT monitors fall into two categories. The first is violations of local securities laws, typically centred on disclosure or events around a merger.
The second is anti-competitive pricing behaviour in financial products. "It's not really a securities violation, but it is in violation of the antitrust statute and there are typically penalties to be paid by the violators, and then those penalties are often distributed amongst the people who are injured, and we help our clients who are damaged through these financial instruments recoup their money," Adler said.
Longley said this sort of litigation is spreading beyond the traditional jurisdictions of the U.S. and U.K.
"If a large global bank is doing something inappropriate in New York or London, they're undoubtedly following similar practices in places like Sydney, Hong Kong or Tokyo," he said.
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