A securities class action is a class action lawsuit brought on behalf of a group of investors who have suffered an financial loss in a particular stock or security. The loss may be a result of fraudulent stock manipulation or other violations of securities laws. Some common types of securities class action claims include investment fraud, unsuitable investments, churning, pricing violations, improper execution of trades, and bad investment advice.
A securities class action may be brought by one or more investors, referred to as "lead plaintiffs," on behalf of everyone in the class action who suffered financial losses as a result of shares purchased during the time period the fraud (or any other legal violations) artificially inflated the value of the stock. This period of time is known as the “class period.”
Although a securities class action is considered common, roughly half of these types of class action lawsuits end before discovery and before the second complaint is filed. Discovery is a pre-trial procedure by which one party gains information held by the other party concerning the case. Common types of discovery are depositions, interrogatories, production of documents, and requests for admissions.
In the end, around one-third of securities class action lawsuits are dismissed and two-thirds settle. It's rare for a securities class action to go to trial. When a securities class action does settle, the settlement amounts are typically in the millions of dollars; the mean settlement amount for a class action filed from 2000-2003 was $48 million, the median was $7 million.
If you have further questions regarding securities class actions or if you are considering entering into a securities class action lawsuit, it's in your best interest to consult with an experienced attorney.