More institutional investors are using securities class-action lawsuits to seek compensation and changes in corporate governance–a trend risk managers need to keep in mind when renewing policies.
Buoyed by changes in federal law in 1995, investors are leading more cases than ever before. This is driving up settlement values and the amount of motions, discovery and other tools used to pursue a case. The result is dramatic–institution-led cases now settle for multiples over those led by individual plaintiffs.
The Private Securities Litigation Reform Act of 1995 (PSLRA) provided that the plaintiff with the largest financial interest in the outcome of a securities class action is presumed to be the most adequate lead plaintiff in the case.
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