In a securities fraud class action, the main claimant generally alleges that defendants violated the federal securities laws by issuing false or misleading statements artificially inflating the stock price of the accused corporation; investors purchased the stock at the artificial price; and, when the truth was revealed, the stock price declined significantly and the investors were damaged as a result. The class members are all of the investors who purchased or otherwise acquired the securities during the “class period”? usually from the day of the first misleading statement until the day that the truth was disclosed. Allegations of securities fraud involving publicly traded companies commonly result in the filing of a class action. As is evidenced here, the typical securities fraud class action settles for only 2-3% of investors’ losses.
There are typically three categories of personal actions for breaches of securities regulations. Initially, a person or a small cluster of investors lodges a complaint asserting securities fraud when there is no collective lawsuit with matching accusations. Secondly, there is a collective lawsuit, but the specific securities obtained by the investor or legal claims made by this investor are not included in the lawsuit. Thirdly, there is a collective lawsuit, but the investor chooses to withdraw from it or “opt out” and pursue an independent opt-out action.
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