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Securities class action lawsuits are brought by investors who suffered financial losses during a specific period due to stock manipulation or fraudulent reporting. Lead plaintiffs are represented by professional attorneys and other investors may be part of the settlement. These lawsuits are subject to the regulations of the nation where they are filed and can impact a company’s market capitalization. Investors should research securities fraud before pursuing a lawsuit.
A securities class action is a lawsuit brought against the company by a group of investors who were shareholders at a particular time. Plaintiffs in a class-action securities lawsuit generally claim that they suffered financial losses over a specific period of time called a “class period.” The basis for this type of class action is often related to allegations of stock manipulation or fraudulent reporting, or anything else that is improper and negatively affects a stock price.
Many of these types of class actions are brought by specific individual investors who are designated as “top plaintiffs”. While some of the other investors who were involved in holding shares in the company during the class period may not be actively involved in the judicial process, they generally will be part of the settlement as long as they registered appropriately during the correct time period. Lead plaintiffs are usually represented by professional class action attorneys who receive fees as part of the settlement.
Because securities class action lawsuits are based on a foundation of securities fraud allegations, they will often be subject to the nation in which the litigation was filed. For example, in the United States, the Securities and Exchange Commission, or SEC, regulates financial law relating to the US stock market. Other nations, for example European nations, have their own regulatory agencies to monitor a national “exchange” or exchange or market. In complex class action cases, corporations defend themselves against a group of investors in a specific “host country” where that nation’s legal system governs the process and any transaction or outcome.
Some financial experts in various countries argue that class action lawsuits tend to weigh down a financial market. They indicate the assumption of lawyers’ fees and the net financial exchange that leaves previous investors with money that must be drawn from the company’s market capitalization, or otherwise affect its immediate revenues. These critics charge that a surfeit of these class action lawsuits can “erode” an economy by bleeding money out of companies.
Anyone involved in a securities class action lawsuit should do some thorough research into what constitutes securities fraud and what types of situations generally result in securities cases being upheld in court. Not all dramatic stock losses qualify as stock manipulation, and the process of successfully executing credible class action cases for investors can be difficult. A prevailing sentiment in many areas of finance is for investors to take their chances and experience stock gains or losses fairly. In some situations, however, a realistic class action lawsuit will effectively establish fraud or market manipulation by the top management of a company.
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