By Alisa Radut, IAC Student Intern Spring 2018
Have you ever received a notice of a class action informing you of a pending lawsuit of which you may be a part? For some investors, opting out of the class might make sense. FINRA provides useful information you should know about securities class actions lawsuits.
First of all, like regular lawsuits, securities class action suits take place in court, not an arbitration forum. If you purchased an investment during the “class period,” the period of time the lawsuit covers, you may be a class member. FINRA takes regulatory actions to protect consumers, and class actions serve a different purpose. While regulations seek to protect overall market integrity, class action lawsuits seek recovery for plaintiffs representing the interests of a particular class of people who have been harmed in a similar manner. Through regulatory actions, FINRA can censure, fine, or even suspend brokers and firms, and sometimes makes disciplinary referrals to other regulators, but it cannot provide benefits or redress to all the individuals harmed by a common wrongful act.
Once you are identified as a member of the class, you don’t have to do anything to be included, you may simply choose to not opt out. In fact, you can be a member of the class even if you have received a previous settlement from FINRA. But if you do not opt out, you may be waving your right to bring this claim at a later time, because as a member of the class you become bound by the outcome of the litigation. If you’ve suffered a significant financial loss, you may want to opt out of the class to preserve the right to bring an individual claim or pursue a higher recovery through some other way, like the arbitration process. Individuals in a class action may not receive as much as they could proceeding on their own, but the costs of proceeding on one’s own may be prohibitive. If you have questions about your options after receiving a class action notice, you should consult an attorney.