How to File a Claim in a Securities Class Action Settlement
A settlement notice in the mail does not pay you by itself. Eligibility, documents, deadlines and the payout formula all come from the notice and the court's orders.
If you bought a company’s stock or other securities during the “class period” named in a securities class action settlement, you can usually collect a share by submitting a proof of claim form, with records of your trades, to the court-appointed claims administrator before the deadline. Payouts follow the plan of allocation printed in the settlement notice. Filing a claim yourself costs nothing.
Most of these cases are brought under the federal securities laws, and the Private Securities Litigation Reform Act sets what a settlement notice must say. Being a class member does not by itself get you paid: in most settlements, only people who file a valid claim share in the money.
Why did I get a securities settlement notice?
You got one because records show you, or your broker on your behalf, may have bought the securities during the class period. Brokers and banks that hold shares in “street name” receive notices and either forward them to customers or send the administrator their customers’ names.
Under 15 U.S.C. 78u-4(a)(7), the notice must state:
- the total settlement amount and the average amount per share;
- the parties’ positions on potential damages per share, if they agree on an average, or the issues they dispute;
- the attorneys’ fees and costs that will be requested, in total and per share;
- the name, phone number and address of a representative of class counsel; and
- a short explanation of why the parties are settling.
Am I eligible for the settlement?
Eligibility turns on what you bought and when. The notice defines three things:
- The class period: the dates between the alleged misstatement and the “corrective disclosure” when the truth came out and the price fell.
- The securities covered: often common stock, sometimes also options, bonds or shares bought in a specific offering.
- Who is excluded: usually the defendants, their families and company officers and directors.
In most plans, you need to have bought during the class period and still held at least some of those shares when a corrective disclosure hit the price. Shares bought and sold before the first disclosure often count for nothing, even though you are a class member.
How do I file a claim?
- Find the settlement website and the administrator’s address in the notice. Confirm the case name and court on the court’s docket, which you can search on PACER.
- Note the claim deadline. Late claims are often rejected, and the court decides whether to accept any.
- Gather records for every purchase and sale during the class period, plus your holdings at the start of the period and at the end of the look-back period: trade confirmations, monthly statements or a broker activity report.
- Complete the proof of claim form online or on paper. List every transaction the form asks for, not only the ones at a loss.
- Sign the certification and submit. Keep the confirmation number and a copy of everything you sent.
- Answer any deficiency letter by its deadline. Administrators usually contact claimants about fixable problems, such as a missing statement, before rejecting a claim.
Shares held by a deceased relative can be claimed by the estate’s representative, with proof of authority. If you hold old certificates and are not sure what the company became, our guide to old stock certificates explains how to trace them.
How is my payout calculated?
The plan of allocation assigns each share a “recognized loss” based on when you bought and sold relative to the corrective disclosures. Your payment is your recognized loss divided by the total recognized losses of all valid claims, times the net settlement fund.
| Step | What happens |
|---|---|
| Gross settlement fund | The amount defendants and insurers pay |
| Less fees and costs | Court-approved attorneys’ fees, litigation expenses, notice and administration costs, and taxes on the fund |
| Net settlement fund | The money shared among valid claims |
| Your share | Your recognized loss divided by all recognized losses, times the net fund |
Federal law also caps damages. Under 78u-4(e), losses based on market price are measured against the stock’s mean trading price during the 90 days after the corrective information came out, so a rebound in that window reduces recognized loss. Many plans skip payments below a small minimum set in the plan. Payments typically arrive many months after the claim deadline, once the administrator finishes processing and the court approves the distribution.
Should I opt out or object?
Those are two different choices with separate deadlines. Opting out, or requesting exclusion, removes you from the settlement: you get no payment from it but keep the right to bring your own lawsuit. Objecting keeps you in the class and lets you tell the judge why the settlement or the fee request is unfair. If you do nothing, you are bound by the settlement and release your claims, whether or not you file a claim form. An investor weighing an opt-out should talk to a securities attorney before the exclusion deadline.
How do I spot a fake settlement or a claim-filing scam?
Real notices name the court, the case number and an administrator whose website is listed in court papers. Warning signs include:
- a request for a fee, a percentage or your bank login before you can claim;
- a website or email that does not match the administrator named in the notice or on the docket;
- pressure to act within hours, or a promise of a guaranteed amount;
- someone offering to buy your claim for cash up front.
Some legitimate companies file claims for investors in exchange for a share of the recovery. That is optional; the same form can be filed free. Stanford’s Securities Class Action Clearinghouse tracks federal securities class actions and is a quick way to confirm a case exists.
Bottom line
The hardest part of most claims is reconstructing trades from years ago, so ask your broker for a transaction history covering the full class period as soon as the notice arrives; older statements can take weeks to retrieve. If you moved accounts, request records from the old broker too. How to report a payment on your taxes is a question for a tax professional.
FAQ
Do I need a lawyer to file a claim?
No. Class counsel already represents the class, and the claim form is designed to be completed by investors. A lawyer matters mainly if you are considering opting out.
I sold at a loss before the bad news came out. Can I claim?
Usually not. Most plans of allocation give no recognized loss for shares sold before the first corrective disclosure, because the price had not yet dropped on the revealed news.
How is this different from a bankruptcy proof of claim?
A bankruptcy claim is filed against the company’s estate under bankruptcy rules, while a class settlement claim is filed with the administrator of a settlement fund. Our guide on filing a proof of claim in bankruptcy covers that process.
What is an SEC Fair Fund?
It is money the SEC collects in its own enforcement cases and distributes to harmed investors. It is separate from a private class action, and a single company can have both.
