As world financial markets continue to become increasingly complex and intertwined, the question of whether your investment is protected by law and if so of which country is oftentimes challenging to answer. However, due to the rise of the global investment portfolio and the fact that more institutional investors are looking beyond their own shores for investment, it is important to evaluate and understand the implications of such a globally diversified portfolio and the possible methods of shareholder redress available to institutional investors.
Moreover, the past few years have shown that the current social justice climate has increased market and shareholder attention to company ESG policies. Indeed, global class actions, ESG and investor stewardship principles have been developing on parallel tracks, but in the months and years to come, they are likely to intersect with increasing frequency. Empowered by evolving collective redress regimes, classes of claimants may bring a wide range of new cases against defendants who have acted unlawfully in matters related to environmental, social and corporate governance issues. That is why it is important for institutional investors to have policy and procedures in place to make sure that they are monitoring and managing global securities litigation and possible avenues of legal redress options across the world.
The rise of such class actions is no longer just a phenomenon in the United States (US). Significant opportunities now exist outside the US, as the number of securities class and group action litigation spanning the United Kingdom (UK), the European Union (EU), the Asia–Pacific region (APAC), and other regions continue to pick up steam.
The landmark 2010 US Supreme Court decision in Morrison v. National Australia Bank, 561 U.S. 247 (2010) (“Morrison”) has also had a tremendous impact outside the United States. In short, the court held that § 10(b) of the Securities and Exchange Act only applies to US securities or domestic transactions, ending its use for class action claims related to non-US transactions in securities listed on foreign exchanges. Therefore, shareholders in companies whose shares trade on exchanges outside the US, no longer able to pursue legal recourse in the US for high profile corporate scandals, have and are increasingly looking to pursue remedies in their home countries or in the courts of the country where a corporation is domiciled or where the stock exchange is located. The result is that more and more cases are being filed in more and more jurisdictions around the world. Sometimes multiple actions in competing forums are proposed or filed against a company for allegations stemming from the same events or facts. The result is that investors are left with a dizzying number of jurisdictions, new laws, and new options to consider when deciding whether to pursue a claim for an investment-related loss.
The United States: The Established Powerhouse
The US remains the most mature and arguably the most investor-friendly forum for securities class actions. Built upon Federal Rule of Civil Procedure 23 (“Rule 23”), cases are certified on an opt-out basis. This means that investors are automatically included in the class, even if they are completely unaware of the case, unless they affirmatively opt-out of the class using the procedure outlined in the court mandated class certification notice or under the guidance of counsel. The Private Securities Litigation Reform Act of 1995 (“PSLRA”) tightened pleading standards and also put in place a statutory procedure for the appointment of lead plaintiff and lead counsel for the class in a federal securities class action.
The Basic Opinion
Since 1988, the US Supreme Court’s decision in Basic, Inc. v. Levinson, 485 U.S. 224 (1988) has allowed victims of securities fraud to allege class-wide reliance under the “fraud-on-the-market” theory. “The fraud on the market theory is based on the hypothesis that, in an open and developed securities market, the price of a company’s stock is determined by the available material information regarding the company and its business.” Basic, 485 U.S. 241. In Basic, the Supreme Court recognized that “[m]isleading statements will [] defraud purchasers of stock even if the purchasers do not directly rely on the misstatements.” Id. 241-42. Thus, the “causal connection between the defendants’ fraud and the plaintiffs’ purchase of stock in such a case is no less significant than in a case of direct reliance on misrepresentations.” Id. at 242.
Basic’s rebuttable presumption of reliance is significant because, without it, each investor would be required to show individualized proof of his direct reliance on specific false or misleading statements, raising concerns that individual issues of proof could possibly overwhelm common ones – potentially foreclosing class treatment. Basic obviates this problem, holding that requiring such individualized proof regarding reliance places an “unnecessarily unrealistic evidentiary burden” on plaintiffs in §10(b) class actions involving publicly disseminated misstatements concerning actively traded securities. Id. at 245.
On 23 June 2014, the US Supreme Court issued a favourable opinion in Halliburton Co. v. Erica P. John Fund, 573 U.S. 258 (2014) (“Halliburton II”) wherein the Court refused to overturn its 25-year-old precedent in Basic preserving investors’ long-standing right to invoke a presumption of reliance at the class certification stage in actions brought under SEC Rule 10b-5 and Section 10(b) of the Securities Exchange Act of 1934.
The Court’s refusal to overturn Basic’s presumption of reliance, and refusal to require plaintiffs to directly demonstrate price impact at class certification, was a significant victory for institutional investors, particularly given the standard advocated by the defendants in Halliburton II. It places on defendants the burden to prove a lack of price impact in order to defeat Basic’s presumption of reliance, meaning defendants will have to provide evidence that their “misrepresentation did not in fact affect the stock price” to overcome the presumption of reliance. Halliburton II, 134 S. Ct. 2398, 2416 (2014).
The US system combines broad discovery, contingency-fee structures, and judicial oversight of settlements, making the US an attractive forum for claimants. It doesn’t hurt that the US has the largest number of publicly listed companies as compared to the rest of the world, ensuring that the volume of securities class actions filed and the decades of jurisprudence provide a well-established path to recovery for investors.
The UK: Emergence of a Maturing Jurisdiction with Tested Tools
In contrast to the US, opt-out group actions are only available to claimants in the Competition Appeals Tribunal, which focuses on competition (antitrust) claims. For other types of collective redress (or group) actions, such as securities litigation, the UK employs an opt-in regime which requires investors to affirmatively join proceedings from the outset.
Securities claims are brought under the Financial Services and Markets Act 2000 (“FSMA”):
- making untrue or misleading statements in or omissions from listing particulars (“Prospectus Liability Claims”) – s.90 of FSMA
- delaying publishing information dishonestly, resulting in loss (“Dishonest Delay Claims”) – s.90A of FSMA and paragraph 5 of Schedule 10A of FSMA; and/or
- making untrue or misleading statements in or omissions from published information where a shareholder relied upon that published information (“Omission/Misstatement Claims”) – s.90A of FSMA and paragraph 3 of Schedule 10A of FSMA.
Prospectus Liability Claims and Dishonest Delay Claims do not require claimants to prove reliance. However, Omission/Misstatement Claims do require some proof of reliance.
While Prospectus Liability Claims are based on negligence principles, Dishonest Delay Claims and Omission/Misstatement Claims are based on the well-established UK law of deceit (fraud), which widens the scope for claimants’ damages to include all losses (e.g., trading costs) resulting from the offending act (failing to tell the truth on time). In most cases, the fraud measure of damages can be more generous to claimants than equivalent damages measures in other jurisdictions.
Procedural differences in the UK (as compared to the US) may mean some claims require more claimant involvement but, by the same token, UK claims are expected to yield higher recoveries. In the UK to date (with more than a decade of track record), virtually all securities group actions have settled (albeit the terms of those settlements are usually confidential, which makes direct comparisons difficult).
Whether intentionally or not, the Dishonest Delay Claim route to compensation appears to have been designed with so called “passive” or “index-linked” investors in mind.
In recent years, securities claims in the UK have more typically focused on egregious wrongdoing (such as bribery, corruption, accounting fraud, modern slavery, etc.) that has been kept secret or denied, and its disclosure withheld from investors and the marketplace for very long periods of time. It’s not unusual for UK claims to be based on convictions or prosecutions pursued by authorities in the UK (such as the Serious Fraud Office) or in the US (such as the Department of Justice) and, therefore, the prospects of proving wrongdoing and its absence from published information are improved substantially.
Do Claimants Have to Provide Evidence or Testimony in UK Securities Claims?
As mentioned above, there is no express requirement to prove reliance in Dishonest Delay Claims (which contrasts with requirements of Omissions/Misstatement Claims). It stands to reason, if the issuer delayed publication of an underlying wrongdoing, then there was nothing for a claimant to have read and relied upon until a corrective disclosure or publication was made.
One of key distinguishing factors of an Omission/Misstatement Claim is that claimants may need to prove that they relied upon something published by the issuer. This might mean more active involvement in proceedings for claimants pursuing such claims (albeit it is usual that only a sample of claimants from within a group of claimants are selected to do so).
In principle, under s.90A of FSMA, each claimant is required to show they relied upon the issuer’s published information that contained the alleged misleading statements or recklessly untrue statements in making the investment decision to purchase or continue to hold their shares in the Company. This is known as reliance. How those investment decisions are made is also important. Therefore, when an investor is preparing to join a claim, it is important to know at the outset whether each claimant and its sub funds are either an active investor (i.e., will say that they, or their investment manager, relied on published information when making investment decisions) or a passive investor (such as an index tracker fund, etc. who relied on the price of shares and their understanding that the price reflected all published information when deciding to invest, rather than expressly relying on the published information).
It is important to note that two recent decisions in the English High Court of Justice have implications for passive investors pursuing securities claims in the UK. In late 2024, the High Court (in the “dark pools” litigation against Barclays) struck out listed-securities claims that depended on “passive” investor theories, holding that active reliance must be shown and clarifying the “dishonest delay” gateway for Omission/Misstatement claims. That decision materially raised the pleading and evidence bar for some claimant cohorts.
In the Barclays decision, Justice Leech left open the possibility that claimants using AI or algorithm-driven investment strategies could succeed in Misstatement or Omission claims, provided they plead and produce evidence demonstrating that the index-tracking fund(s) they invested in incorporate published information—or that omitted information would have been material and influenced a different decision.
A subsequent High Court decision (in the Standard Chartered securities litigation) declined to impose a categorical restriction on passive investors proceeding under s.90A/Schedule 10A, re-opening questions about how certain investors (i.e., index tracking funds or mandate-driven purchasers) may meet reliance – fact-sensitively and at later stages. That decision was due to be considered by the Court of Appeal in early 2026, but the case settled in December 2025. As a result, the appeal will not be heard and the High Court’s refusal to strike out the passive investors’ claims remains in place, preserving the decision’s effect and leaving the possibility for similar claims to be advanced by such investors in future cases.
Funding and Insurance
UK lawyers are permitted to represent clients on a contingency basis (like the US) by using a Damages Based Agreement (“DBA”). A DBA in the UK is a “no win, no fee” arrangement between a solicitor and client where the solicitor’s fees are paid as a percentage of the damages recovered if the case is successful. If the case is unsuccessful then the solicitor does not receive a fee. Therefore, the solicitor shares the risk of litigation and has an alignment of interests with the client.
Another type of fee arrangement employed in the UK is called a Conditional Fee Agreement (“CFA”). When solicitors enter into a CFA, they agree to discount their usual hourly rates by an agreed percentage (the “At Risk Percentage”) but on the understanding that in the event that the client is successful in its claim they will receive the At Risk Percentage AND a percentage uplift on their fees (which will also have been agreed with the client at the time of entering into the CFA) (the “Success Fee”). If the claim is unsuccessful, the solicitors ONLY receive their fees at the discounted hourly rate. This reduces the upfront cost to the claimant (which in turn reduces the exposure for the litigation funder who is supporting the claim) on funding the case. Barristers will also, often, agree to act on a CFA basis.
Traditional third-party litigation funding is permitted and has been used in the UK for many years but following the UK Supreme Court’s 2023 decision in PACCAR, funders (particularly for securities claims) have increasingly moved in favour of financing solicitors’ DBA engagements (in return for a share of the lawyers’ revenue from the claim) as opposed to entering into litigation funding agreements directly with each claimant. As mentioned above, this trend marks a significant step towards the alignment of commercial interests between claimants, their lawyers and other financial stakeholders in litigation.
Unlike the US, the UK operates under a “loser pays” model (a/k/a adverse costs) which means that a successful party to an action may recover a proportion of its legal costs from the unsuccessful losing party. The award of legal costs is solely with in the discretion of the court. To mitigate this adverse cost risk, After the Event (“ATE”) adverse legal costs insurance is obtained for the claimant group, alongside third-party litigation funding, to protect the claimant group’s adverse cost liability. ATE coverage may also cover the claimant group’s own disbursements – the expenses incurred by their solicitors while pursuing the litigation (i.e., court fees, expert witness fees, barrister fees, etc.).
About Noah Wortman
For over thirty years, Noah has supported global investors and consumers affected by corporate misconduct – including securities fraud, market manipulation and breaches of regulatory requirements – to implement strategies for collective redress and ultimately generate recoveries. He has been involved in the development and launch of numerous securities litigations on behalf of institutional investors in jurisdictions across the world including the UK, the Netherlands, Australia, Germany, Denmark, Canada, Israel, Japan, Italy, and the US which have resulted in the recovery of billions of dollars.
About Walgate Litigation Management
Founded in 2025, Walgate Litigation Management is a wholly owned Fladgate entity that specialises in the identification and management of securities and consumer group actions. It was constituted to identify claims, secure funding for actions to be conducted by Fladgate and support the Dispute Resolution Department in managing those matters once successfully funded.
- Allianz Funds Multi-Strategy Trust & Ors v Barclays plc, [2024] EWHC 2710 (Ch) (“Barclays”).
- Persons Identified in Schedule 1 v Standard Chartered plc, [2025] EWHC 698 (Ch) (“Standard Chartered”).
- R (on the application of PACCAR Inc and others) v Competition Appeal Tribunal and others, [2023] UKSC 28 (“PACCAR”).
