A securities class action is a lawsuit filed on behalf of a large group of investors seeking to recover economic losses related to a particular stock or security. In a class action, one or two of the named plaintiffs will act as the "lead plaintiff" or class representative. Any settlement made on behalf of the class must be approved by the judge appointed to the case. A securities class action can take as long as three years or more from the date of filing until it is resolved. By way of comparison, the typical securities arbitration claim takes approximately 15 months.
The class action process allows investors to pursue a securities claim that would be too small or too costly to pursue individually. Class members, however, also have the right to "opt out" of the class and pursue their case on an individual basis. Class action recoveries must be shared with the entire class and, one of the criticisms of class actions is that the recoveries often amount to pennies on the dollar. Individuals with larger claims should carefully consider whether to participate in a class action claim or opt out. By opting out, the investor is able to pursue a securities arbitration claim seeking the recovery of their entire economic loss. To discuss whether opting out of a securities class action is appropriate for you, please contact the Alcala Law Firm.
For more information, please see our California Securities Fraud Blog article "Securities Arbitration vs. Class Actions: Consider Your Options."