Securities litigation in the UK is on the rise and we are at the forefront of its development, with market leading experience and deep expertise.
We advise on the full spectrum of issues arising from the growth of securities litigation in the UK, including the potential availability of recovery opportunities (compensation) for institutional investors and major shareholders in UK public companies.
Compensation is available for investors (ie shareholders) in public companies who suffer loss when, typically, the share price of the public company drops after bad news about the company is released, when that news should have been released earlier. Essentially, securities litigation is designed to encourage disclosure and transparency and to facilitate the efficient operation of the market.
Securities litigation may be considered when a UK publicly listed company (PLC) (1) has not properly or adequately disclosed a material piece of information to the market in a timely fashion, and (2) suffers an impact to its share price when the ‘true’ information is disclosed.
In the UK, securities litigation is a creature of statute, with the causes of action found in either section 90 or section 90A of the Financial Services & Markets Act 2000 (FSMA). These provisions seek to enshrine norms of good corporate behaviour, to permit and encourage the efficient and transparent operation of the stock market, and thereby to let the market (not the PLC) set the proper price for a PLC’s shares.
Successfully representing 234 institutional shareholders seeking +£1b in compensation in securities litigation against Tesco PLC. Proceedings were commenced in September 2020 (just before limitation expired) and recently successfully settled (as announced by Tesco in its half year results in October 2021).
Currently ‘book-building’ a combination s90/s90A securities litigation group action against a major commodities producer and trader PLC, with more than 120 investors signed up already with estimated losses in excess of the commercial viability threshold.
Currently assessing the commercial viability for a s90A securities litigation case against a fast growing fashion online retailer.
Recently considering the viability of a securities litigation claim against a global clothing fashion brand, arising from the large drop in the brand’s share price following their disclosure in December 2019 and again in January 2020 that it had materially overstated the value of its inventory when it had published its Annual Report in May 2019 and thereafter.
Acting for a group of institutional investors seeking compensation from a national supermarket chain arising from the large drop in share price following the supermarket’s disclosure in September 2014 that it had materially misstated the level of its commercial income within the expected half yearly profits which it had published in August 2014.
Why is securities litigation growing in the UK?
As a major economy, the UK is the headquarters or primary operating centre of many of the world’s largest companies, including but not limited to financial institutions, and many of these are publicly listed on the main market of the London Stock Exchange or on AIM. Many of the world’s largest and most sophisticated institutional investors are located in the UK.
Until recently, however, securities litigation against misbehaving PLCs was not undertaken in the UK. But this has changed, and in the last five-seven years we have now seen three-four major cases in this area.
Is there regulatory support for securities litigation?
Yes, there is regulatory and policy support for securities litigation, as policy makers and corporate regulators in the UK and internationally recognise the positive benefits of private securities litigation in driving deterrence objectives, encouraging better corporate behaviour and governance, and enabling investors to obtain redress. This is especially so in circumstances where regulators are sometimes stretched to discharge their functions and can see private securities litigation as being both complementary and supplementary to the investigatory and enforcement actions which they have the capacity to undertake.
Should securities litigation be seen as part of a governance framework?
Yes, securities litigation should be seen as part of a framework that includes the UK’s Corporate Governance Code (2018) and the UK’s Investor Stewardship Code (2019), each of which is designed to encourage improvements in corporate governance, including better corporate disclosure, at the public companies in which we invest.
Is there a link between the growth of securities litigation in the UK and the growth of litigation finance?
Whether co-incidentally or not, securities litigation in the UK is increasing at a time when the availability of third party funding and of innovative alternative fee arrangements has also developed. This has allowed institutional investors who have suffered a loss to participate in securities litigation, if they choose, with no downside risk and no cost to their balance sheet. Securities litigation can be brought without litigation financing, but more often than not it will be brought with the support of litigation finance or alternative fee arrangements where risk and reward are shared.