Found Money

Have you ever received a claim form for class action settlement proceeds? Chances are, even if you have received such a form, you’ve done what most people do with it, that is, thrown it away.

Studies show that billions of dollars are left unclaimed in class action lawsuits. One study in particular found that in 2005, only 28% of eligible claimants participated in class action settlements. This same study posited that between $1 billion and $2 billion go unclaimed every year.

And, for some, there is a growing trend which suggests there may be consequences beyond just leaving money on the table.

Most securities are held by an institution, bank or brokerage firm as nominee on behalf of the beneficial owner. Since the security is held in the “street name” of the institution, notices of class action settlements are sent to the institution. What then is the obligation of the institution to file a class action claim on behalf of a beneficial investor?

An interesting case involves a lawsuit against Wachovia/Wells Fargo. Here’s the story: In 2001 there was a class action lawsuit filed on behalf of investors against Asia Pulp & Paper. The lawsuit was settled in 2006 for $46 million. The claims process took place in 2007. In 2009 a group of investors sued Wachovia (now Wells Fargo) for breach of fiduciary duty for failing to pursue claims on behalf of the beneficial owners. The lawsuit is still pending.

Most nominees notify their customers of their rights under class action settlements and this may be sufficient. But what about trust departments? Or pension funds? Or any broker/trader/fund with discretionary authority? These entities need to have a plan in place to handle these claims. Currently there are multiple billions of dollars in class action settlement in the claims process.

I have just such a plan. Stay tuned for my latest venture which will be a turnkey class action claim service. I will post more details this week.

This movie clip should keep you busy until then.

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