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Navigating Three of Today’s Biggest Securities Class Action Pain Points
By: Bill Kidder, Financial Recovery Technologies
Documentation audits, claim deficiencies, and class action program governance are some of the key shareholder recovery challenges pension funds face today. To address this operational friction, plans need the right mix of people, process, and technology to solve routine issues with automation and proactively flag non-standard issues for hands-on review.
This is an excerpt from NCPERS Summer 2025 issue of PERSist.
A successful shareholder recovery program has long demanded specialized expertise – not only in the legal realm, but also regarding the operational and historical data complexities of class actions.
Today, changing filing requirements and greater scrutiny of securities class action claims have made filing and recovery even more nuanced, as settlement administrators face pressure to prevent fraud and distribute payments efficiently. As a result, ensuring claim survival from the initial filing through final payment distribution has become more challenging for pension funds.
To navigate this operational friction, plans need the right combination of people, process, and technology so they can solve routine issues with automated workflows and proactively flag non-standard or complex issues for manual intervention.
Managing Documentation Audits
Increasingly, the administrators responsible for processing class action settlements require pension funds to provide independent documentation (e.g., bank and broker statements) that substantiates the transaction activity provided in their filed claims.
In typical securities class actions, higher-value claims are more likely to be audited. This raises the financial stakes of addressing these requests quickly and effectively, given the often-large volume of submissions that administrators must review in a timely manner. SEC Fair Funds present an even greater hurdle for investors, as these enforcement actions require full documentation of all claims in order to receive payment.
Exhibits 1 and 2 show the number of documentation audits FRT has managed in securities class actions and SEC Fair Funds from 2020-24, illustrating the dramatic growth in claim scrutiny. In response, plans should ensure they establish processes and solutions for managing these requests efficiently – as this gives shareholders more time to respond and reduces the risk of claim rejection. For example, in lieu of providing original transaction statements when they no longer exist, FRT has developed templated affidavits that attest to the reliability of a plan's records.
Preventing Claim Rejections
Settlement administrators can deem claims deficient for a variety of reasons, including:
- Ineligible securities (i.e., not covered under the settlement terms)
- A determination of zero recognized loss
- Missing TINs or account information
Addressing these issues when they arise is critical, as they determine claim survival and recovery amounts. At FRT, we subscribe to the slogan that “the best deficiency is one that never happens.”
For pension plans, their class action recovery processes should be able to identify routine issues (such as those listed above) for further investigation and, if needed, engage in direct communication with the administrator to validate the eligibility of a claim. While administrator decisions are largely accurate, mistakes do happen given the large number of claims processed in most securities settlements. Having a “second set of eyes” monitoring the quality of your plan's class action claims can help pensions proactively cure deficiencies.
Class Action Program Oversight
Maintaining an effective class action program today means tracking and understanding where filed claims stand in the recovery lifecycle. Fund operations teams need a way to monitor results and support governance objectives, while also balancing class action work against their many other day-to-day responsibilities.
Ultimately, pensions can benefit from having a single book of record for shareholder recovery – one that can provide case-specific insights, board-level reporting, and automated alerts regarding upcoming case deadlines.
Without this, it would be difficult for pensions (or third-party providers responsible for class action filing) to understand the status of ongoing recovery opportunities and how they evolve over the course of a multi-year settlement lifecycle.
Conclusion
Facilitating securities class action monitoring, filing, and recovery falls squarely under a plan's fiduciary responsibility to its members. But how pensions manage their class action programs matters more now than ever, primarily for the reasons listed above.
Plan executives can benefit from assessing the checks, balances, and internal controls of their class action programs today – and whether they serve to improve claim survival rates.
Bio: As COO, Bill Kidder is responsible for global operations and client success. He joined FRT in 2020 from Brown Brothers Harriman & Co., where he was most recently the executive in charge of global project delivery for Investor Services. Bill graduated magna cum laude from Boston University and earned his MBA from Boston College.
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