This week’s Economist has an article (subscrip. req’d.) on the failure of many investors, including institutional investors, to file claims in securities fraud settlements. The article notes that institutional investors may be “violating their fiduciary responsibilities when they do not try to get their money” and could be the subject of “class-action suits to come.” An easy prediction – especially since those suits have already been around for a year.
Quote of note: “A study by James Cox, a colleague of Mr McGovern’s at Duke, of 118 securities class-action suits between 1995 and 2002, published in the Stanford Law Review last month, concludes that 72% of institutions never claim their full share of the proceeds. Mr Cox offers several explanations: institutions’ distaste for a form of litigation that, as they see it, benefits mainly lawyers; low expected gains; and the cost and hassle of claiming.”