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US Investors Tap Into Lucrative Investment Fraud Lawsuits Abroad

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By Wednesday, 05 December 2018 03:01 PM Current | Bio | Archive

Some 1.5 billion teachers, administrators, bus drivers and other professionals who have retired from the Texas public school system are benefiting from securities litigation abroad.

That’s because their institutional investor, the Teacher Retirement System of Texas (TRS), is actively participating in class action lawsuits that are resulting in multi-million dollar settlements.

“Pursuit in these cases and recoveries is well within our fiduciary duty for the beneficiaries of our plan,” said Lane Arnold, assistant general counsel of investments with TRS.

Compared to only 29 in 2014, about 102 new securities class action complaints were filed in non-North American jurisdictions since 2017, according to ISS Governance, with Taiwan, Australia, Israel, Germany, England and the Netherlands ranking among the top six.

In June, a Dutch appeals court approved the largest securities settlement ever reached in Europe of $1.5 billion involving Ageas, formerly known as Fortis, in the Netherlands.

“We’re in all equity markets across the planet so we do have exposure in every single one of all of the companies and countries that are currently being litigated or have settled,” Arnold told Newsmax Finance without disclosing the amount of monies TRS has recovered.

The Fortis settlement resolves all claims in connection with litigation arising out of the acquisition of Dutch bank ABN Amro. Filed in 2011 in European courts, the class action lawsuit concerned the bank's financial health and the value of its holdings tied to subprime mortgage securities issued in the U.S. before the 2008 financial crisis hit.

“There are new laws in Europe now that didn’t previously exist, which require securities class action litigation to be made possible in all EU countries,” said Frank Peters, an attorney with bureau Brandeis in Amsterdam, Holland who is currently working on an active class action lawsuit involving Steinhof. “The Netherlands was the first to start implementing these new requirements, which allow now for class settlements that are binding in the U.S.”

Although institutional investors, such as TRS of Texas, are proactive about recovering losses from securities that have declined as a result of fraud or mismanagement, many active managers allegedly disclaim the obligation to advise investors to sue.

“Whether the manager has a responsibility to advise clients about litigating a securities loss is a hot topic because investment advisors say they were hired for investment not legal expertise,” said Irwin Schwartz, principal of Dividex Management, LLC in Massachusetts, who established a Registered Investment Advisory (RIA) to manage the exposure of clients, such as the California State Teachers Retirement System, to securities litigation as an asset.

But it’s not just institutional investors that stand to gain. Individual 401(k) investors can also benefit from these class action settlements that seek to recover securities fraud losses.

“If 401(k) administrators are managing co-mingled investments, then there is an opportunity to recover funds for the 401(k) investor in mutual funds and there is fiduciary risk if the administrator is unaware of or ignores these recovery opportunities for foreign positions,” Schwartz said. “If the plan administrator does not join litigation abroad, 401(k) investors can potentially sue the plan administrator for breach of fiduciary duty over money left on the table.”

Currently, securities fraud litigation against Dankse Bank and BHP Billiton are just beginning while Volkswagen, Steinhoff and Vivendi are on-going and claims may still be filed with the Steinhof, Danske Bank and BHP Billiton class action cases, according to Guus Warringa, an attorney with Grant & Eisenhofer’s Amsterdam law office in the Netherlands.

“We take everyone on board,” Warringa told Newsmax Finance. “There are clients with losses as small as $8,000, which is fine. Then there are clients with massive losses. It depends on the case, asset or fund manager.”

Most American investors, however, are unaware of foreign recovery opportunities.

“If the securities are in the name of the individual customer in an individual customer account, then the individual customer is responsible for making the claim and their financial advisor should help them make the claim,” said Kurt N. Schacht, managing director of Chartered Financial Analyst (CFA) Institute’s advocacy group.

Juliette Fairley is an author, lecturer and TV host based in New York

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Most American investors, however, are unaware of foreign recovery opportunities.
investment, fraud, lawsuits, abroad
Wednesday, 05 December 2018 03:01 PM
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