Securities Arbitration vs. Class Actions: Consider Your Options

Securities class actions are on the rise again. In 2008, there were 210 federal securities class actions filed, nearly half involved firms in the financial services sector.

Class Actions: Not for Everyone

For millions of consumers, participating in a securities class action is an almost effortless process. Class members are seldom required to do much more than submit a proof of claim and wait for their share of the recovery.

The primary disadvantage is that, even though class action settlements can be considerable, they must be distributed to a large class of customers. As a result, individual recoveries are often quite small in comparison to the multi-million dollar settlements and awards paid out by large corporations.

Opting Out of Securities Class Actions

Another option that is frequently overlooked is “opting out” of a securities class action and pursuing an independent arbitration claim. Customers that have suffered substantial investment losses could recover significantly more by pursuing their own individual claim.

The “Opt Out” Deadline

If you recently discovered that you are a member of a pending securities class action, you will have a limited period of time to decide whether to participate in the lawsuit or pursue your own claim in arbitration. If you do nothing, you may be automatically included in the class.

See also: Are Securities Arbitration Cases More Financially Rewarding for Investors than Class Actions?

Schwab Yield Plus Class Action

The Schwab Yield Plus case is a recent example of a class action that is awaiting certification by the Court. The pending Schwab Yield Plus class action applies to investors who purchased the Schwab Yield Plus (SWYPX and SWYSX) money market funds.

The class action complaint alleges that Charles Schwab Corporation issued untrue statements regarding the lack of diversification of these funds and the extent of investments assigned to sub-prime mortgage backed and related securities. The complaint also alleges the funds registration statements and prospectuses contained untrue statements of material facts, and omitted important information regarding the funds’ investments, ultimately misleading investors.

If the Court certifies the case as a class action, a notice will be sent out to investors in these funds advising them of the class action and their right to opt out.

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Carefully consider your options before participating in a class action. If you believe you have a meritorious securities claim, speak with a securities attorney to discuss your rights and the advisability of opting out based on your individual circumstances.

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