By Sundeep Tucker in Hong Kong
Published: November 16 2008 22:47 | Last updated: November 16 2008 22:47
Asian investors are missing out on billions of dollars by not taking part in class action lawsuits against US companies whose managers have been accused of improper corporate behaviour, according to a study.
Pension and asset managers in the region failed to claim a combined $1.5bn in compensation between 2000 and 2007, said Goal Group, a class action services specialist.
In addition, the subprime-related crisis has triggered a wave of class action lawsuits and Asian investors are likely to miss out on billions more in the coming years unless they take steps to recoup money, according to UK-based Goal.
The report found that institutional investors in Japan, Singapore and Hong Kong were the hardest hit by their failure to participate in US securities class action litigation. About three out of four Asian investors fail to claim what they are entitled to a higher ratio than in the US or Europe.
Investors typically need to register with a lead plaintiff or law firm filing a class action lawsuit but Asian shareholders have traditionally been culturally averse to corporate confrontation or have shied away because of their perceived inability to track an often complicated claims process.
Stephen Everard, managing director of Goal, said: There is a clear duty of care for institutional investors in Asia to register claims in US courts on behalf on their clients but our research shows that non-participation is costing these investors dearly.
Mr Everard said that a downturn in filings in 2006 raised the possibility that shareholder class actions were on the wane. However, he added: We have seen renewed vigour in the courts and an overall increase in filings inspired by the international credit crisis.
Last year 32 class actions relating to subprime were filed in the US, mainly against mortgage companies and lenders. Lawyers forecast that the global financial crisis would spawn hundreds of further class actions against financial institutions that have taken writedowns.
US courts often set strict time limits on claims and Goal estimates that the bulk of the $1.5bn awarded to Asian investors between 2000 and 2007 is now lost. Unclaimed proceeds are typically handed to charity or as extra compensation to those who registered to claim.
According to Goal, almost $12bn in settlements, to which shareholders were entitled, was not reclaimed through class actions from 2000 to 2007. The list includes settlements against Enron, Worldcom, Parmalat and Royal Dutch Shell.
Copyright The Financial Times Limited 2008
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