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New Resource Available from NCPERS to Help Public Pensions Manage Securities Litigation Exposures

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  • On: 08/16/2023 15:05:22
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On July 26, NCPERS hosted a webinar to share insights about a new pilot program, NCPERS Securities Fraud Recovery Services, and discuss some of the challenges public pensions face in managing their securities litigation exposures.

By: Lizzy Lees, Director of Communications, NCPERS

On July 26, NCPERS hosted a webinar to share insights about a new pilot program, NCPERS Securities Fraud Recovery Services, and discuss some of the challenges public pensions face in managing their securities litigation exposures.

Hank Kim, executive director and counsel for NCPERS, moderated the conversation among panelists Barbara Hannah, chief counsel for SBCERA; Lydia Lee, of counsel to Lieff, Cabraser, Heimann & Bernstein; and Irwin Schwartz, president of DIVIDEX Management.

To start, Kim provided background on why the pilot program was created and how it fits in with NCPERS other affinity programs and services for plans. One aspect of NCPERS' mission is to “bring scale to small” by providing broader, affordable access to some of the best-in-class services used by the largest pensions in the country, he said. Our affinity programs make it possible for small and mid-market plans to take advantage of these services at a minimal cost.

As securities litigation has continued to get more and more complex, NCPERS identified the need for smaller plans to gain access to a service used by CalSTRS, MassPrim and others to help them optimize their recoveries and supplement their existing protocols for monitoring securities fraud opportunities. “I like to think of our pilot program as similar to the role that investments consultants play. As your plan is executing its investment mandates, you rely on investment consultants to provide you with independent, unbiased opinions on asset managers. Likewise, we expect this program to act in a similar way relative to the merits of pursuing securities litigation cases,” added Kim. NCPERS is subsidizing the cost of the services, so eligible members can enroll for free. Learn more about the program and find out how to enroll.

Schwartz provided additional background on the pilot program, which was developed over a year-long period based on feedback from focus groups in the target demographic. Only NCPERS member pension funds with $30 billion AUM or less (or with annual average securities litigation recoveries of less than $2.5 million) are eligible to participate in the program.

The services included in the pilot program are designed to complement those offered by securities litigation firms, allowing funds to make more informed decisions and better meet their fiduciary duties. The pilot program services include:

  • Up to three free consultations where, upon request, DIVIDEX Management will help your fund evaluate whether it makes sense to pursue a domestic or foreign securities fraud recovery opportunity. Such an evaluation may include a loss analysis and prudence of serving as lead plaintiff or opting-out of domestic cases, or joinder in foreign cases. Additional evaluation services are available for a fee of $500 per case consultation.
  • Free monthly reports containing information on foreign securities fraud recovery opportunities; claims filing deadlines for select class action settlements; and payouts from select large class action settlements.
  • Reconciliation services to analyze the efficacy of the participating member's securities class action settlement claims filings and recoveries on selected cases. For this service, participating funds will provide DIVIDEX Management with the subject securities transactions and holdings data. In the event a fund elects to receive a Settlement Recovery Evaluation, the cost will be $100 per case, payable directly to DIVIDEX Management.

Next, Hannah shared why SBCERA decided to participate in the pilot program. The fund's securities litigation monitoring services have evolved over time, and—without access to the services offered through the pilot program—she views their participation as the next step in this evolution. “I believe that the services provided by DIVIDEX will give us another view of why we would join or why we would potentially be a lead plaintiff in a domestic litigated matter. It just provides another layer of analysis,” she said.

When deciding to participate in the program, she also learned that analyses are done on a case-by-case basis. If an analysis is requested, the fund only needs to securely share transaction data for that specific case—which she views as a plus.

The pilot program services don't replace what the law firm does, she added. At SBCERA, when there is a litigated matter the law firms provide a memo, and Hannah, as Chief Counsel, also provides a memo. With the added insights from a case analysis provided by DIVIDEX, the board and CEO can more easily make an informed decision about pursuing litigation.

Lee then discussed some of the challenges pension funds can face with managing securities litigation exposures. She noted the continued involvement of institutional investors maximizes the recovery for all shareholders, citing a Stanford University study that found “when a public fund serves as lead plaintiff in a case, the recovery is anywhere from 28 to 46 percent higher than in cases where public fund leadership is absent.”

In highlighting the benefits of working with law firms when deciding whether or not to pursue litigation, she noted that NCPERS member litigation firms are governed by strict ethical mandates. “It's critical to select more than one firm…to get different perspectives on cases.” If multiple firms are recommending you serve as lead plaintiff, it can also indicate the strength of the case.

She ended her portion of the presentation by reiterating that their pre-litigation services are free. “In exchange, public funds must occasionally undertake the responsibility of a lead plaintiff role… I think it's an obligation where everyone benefits, and the system will suffer if you do not participate.”

Watch the full webinar recording, and find additional information about NCPERS Securities Fraud Recovery Services (including answers to frequently asked questions) here. Be sure to enroll today—space is limited.


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