How you could be part of a class action

Published in the Daily Telegraph, August 2014 by Dale Gillham

The failure of boards to report information to the market at the time it was known has seen a significant rise in the number of class actions launched against listed Australian companies.

This lack of public disclosure has left shareholders out of pocket and wanting to take on companies in the courts.

Sadly, some shareholders are not aware of the opportunity to be a part of the legal action to get their money back.

Class actions against listed Australian companies occur when large numbers of shareholders believe they have a right to compensation, and this is where there really is strength in numbers.

Sometimes large shareholders, or a group of shareholders, instigate the legal action, which is generally the result of enough people making complaints that combined legal action is warranted.

When class actions are filed with the courts, other shareholders are then given the chance to participate in making the claim.

So how do you, the shareholder, know whether you qualify to be part of the action?

Often you will be notified by the legal firm taking the action on behalf of shareholders, if you owned shares during the relevant period. If you are contacted ensure you read the background information explaining why the action has been filed, details of a settlement if this has been agreed, and instructions to participate.

Many don’t read all of the information and unfortunately, failing to read in these situations could cost you.

In most cases, if you are not aware of the court action, or even if you do receive the information but choose to do nothing, you won’t receive any compensation, even if a settlement is paid.

As well as having to pay compensation to shareholders, if the company is found to be at fault they may be fined by the Australian Securities and Investments Commission (ASIC) for breaching the ASX Listing rules or the Corporations Act.

There are a number of law firms which specialise in these large legal cases, including Maurice Blackburn and Slater & Gordon.

Information about current cases is available on their websites.

The activities of company boards are under closer scrutiny since the GFC, and the media is helping by making it so much easier for us to be kept informed about any wrongdoings.

The positive side is that it drives people to really understand how the market works and how the actions of company boards can impact share prices.

In recent years companies involved in legal action have included Newcrest Mining, Leighton Holdings and QBE Insurance Group.

If you become aware of a class action against a company you hold shares in and haven’t received information on the case yet, then do some research so you can find out whether you have a
right to claim compensation.

Remember class actions have cut-off dates, so you need to act quickly. Above all, be well-informed, as there is no substitute for knowledge when it comes to properly looking after your investments.

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