While much attention has been paid in recent years to the pleading standards under the Private Securities Litigation Reform Act of 1995, the effects of the 2002 Sarbanes-Oxley legislation in 2002 and the Supreme Court’s 2005 decision in Dura Pharmaceuticals v. Brouda , another issue has arisen. Injured institutional investors have begun to pay more attention to ensuring that they receive their fair share of securities class action settlements. Leaving money on the table after a settlement defeats the purpose of securities class action litigation designed to compensate injured investors for economic harm caused by securities fraud. Investors receive a distribution from a settlement only if they participate in the settlement process. But the complexity of the settlement process surprises many investors. Getting from the settlement to the distribution of money to investors can be a time-consuming and labor-intensive process.
Parties Agree To Settle
Once the parties to a securities class action lawsuit reach an agreement in principle, the agreement must be reduced to a writing. A short version of the agreement, usually called a memorandum of understanding, or MOU, can be drafted and signed fairly quickly. The MOU, which is often completed within a week of the oral agreement, contains the bare bones of the agreement, with the details left for the formal settlement stipulation. Once an MOU is signed, and the court is notified of the existence of the settlement, the work on the detailed terms of the settlement begins. Corporate defendants often issue a press release announcing the settlement of the securities case after an MOU is signed.
