Securities Litigation & Class Action Trends ― 2016 Year in Review By Financial Recovery Technologies

Global Opt-In Litigation & Settlements

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INTRODUCTION

The global securities litigation landscape continues to grow and evolve. 2016 saw a record number of global opt-in actions filed – nearly a 56% increase from 2015. We’re closely monitoring an uptick in activity across the globe and a number of emerging jurisdictions. Within jurisdictions that have been consistently active, we’re seeing more parties involved (litigation funders, law firms, investment recovery firms), as well as new and inventive causes of action. Most importantly for our clients, these changing dynamics are complicating the participation analysis – there is a seemingly limitless number of factors that institutions should weigh before deciding whether to get active in a jurisdiction. While global securities litigation cases have been prevalent in recent years, some noticeable trends emerged in 2016 that look poised to continue throughout 2017. GLOBAL TRENDS 1. Increase in number of cases and active jurisdictions

Let’s turn to the global or opt-in trends we’ve seen over the past year: at a high level, 43 new actions were brought in 9 different jurisdictions. The interesting thing about global cases is, often times there are multiple actions filed against the same defendant by multiple litigation organizers – we would count these as more than one separate case, because they represent separate opportunities for investors to recover on their losses. Volkswagen is a great example. Not even counting those actions proposed in 2015, in 2016, there were three actions proposed in Germany, and two in the Netherlands, both in an effort to vindicate investors in Volkswagen securities traded outside the United States.

What are “global cases?” At Financial Recovery Technologies, we refer to “global cases” as securities litigation arising outside the U.S. and Canada that represent opt-in litigation opportunities. These actions are called “opt-in” cases because investors must affirmatively join a lawsuit in order to recover damages. That’s not the case in the U.S. and Canada, which operate under an opt-out system whereby investors are presumed to be a member of the settlement class unless they affirmatively choose opt out of the class.

Other trends related to jurisdictions and the growing number of cases include: a. Taiwan continues to be the most active jurisdiction in terms of case count, with at least 18 new

actions proposed last year. b. Australia is a close second with 13. We discuss in the next section why Australia is an increasingly

important jurisdiction for institutions to monitor. c. March was the most active month this year, with 7 new global actions proposed in 5 separate

jurisdictions. d. We also saw a number of global settlements – the Fortis case settled for $1.2 billion, the largest

ever through Dutch collective settlement procedures, which we discuss in a later section. We also saw a number of settlements in Australia with OZ Minerals and Newcrest Mining among them.

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2016 Global Cases By Jurisdiction

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2. Developing sophistication of global jurisdictions

As suggested earlier, group action regimes outside U.S. and Canada are becoming increasingly sophisticated, meaning: a. Jurisdictions are adapting to include more market participants. b. More cases are being filed.

c. There’s a stronger track record of recoveries. d. Damage methodologies are becoming now broadly accepted,

allowing for greater predictability in terms of recoverable amounts relative to the overall damages claims.

e. Perhaps most importantly, the more sophisticated regimes have made it easy for investors to participate, recognizing the risk factors that the institutional community considers before becoming involved in an opt-in scenario.

Australia is front and center among those jurisdictions that are responding to institutional interests. In fact, Australia’s group action regime has matured so much that many institutional investors are beginning to view it similar to the U.S. or Canada – meaning they perceive no risk in participating in a given case, provided they have any potential losses.

AU Class Action Report

Click here to read FRT’s report to learn which catalysts have driven Australian class actions to account for nearly one-third of all new international filings.

There are a number of reasons why this is the case: 1. In Australia, non-lead claimants are shielded from the risk of adverse-party cost shifting; there’s

no risk that, in the event the case is unsuccessful, that the legal costs of the prevailing party would be placed on the claimants. And because litigation funders underwrite the costs of the entire litigation as it proceeds for a potential future success fee, there’s no upfront cost either.

2. Australia essentially guarantees complete anonymity for participating claimants. There little to no risk that an institution’s identity will be disclosed to the defendant corporation in the course of settlement discussions or to the public at large. This is a very important factor in the participation calculus of many institutions.

3. Class actions in Australia do not employ any form of discovery procedure in the way that we do in the U.S. This is an equally important factor for institutions – there’s no risk of burdensome document production, and no risk that your portfolio manager will be hauled down to Federal Court in Australia to testify.

4. For these reasons and several more, many institutions are taking the position that if they have any losses whatsoever in Australian opt-in cases, they’ll willingly join.

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3. Continued rise of Dutch Foundations

Another interesting development in the Global landscape over the past several years is the rise of Dutch Foundations. Dutch Foundations arise in the Netherlands, and are essentially voluntary vehicles established for the purpose of settling claims across multiple jurisdictions. They arose in the wake of Morrison, where the U.S. Supreme Court determined that securities claims against non-U.S. issuers with securities traded outside the U.S. must be litigated in their home jurisdiction. While Morrison paved the way for jurisdictions like Australia to develop their group litigation regimes, it also created a great deal of confusion in the case of broadly traded securities of Global corporations, particularly in Europe where they often trade across multiple exchanges. The Dutch Foundations are a vehicle to resolve this confusion, by providing a collective forum within which parties can settle on a pan-European basis, with the implication that Netherlands courts have reciprocity across jurisdictions.

Global Case Spotlight – Volkswagen

Click here for a brief video on the Volkswagen litigation that highlights the complexity of a non-U.S. cases and the impact Dutch Foundations may play in future global litigation.

Again, the Fortis settlement for 1.2 billion in March of this year is a big win for the Dutch Foundation, particularly because the Fortis was a Belgian bank operating across Europe. It remains to be seen as to what role Foundations will play in 2017 for some of the ongoing cases. There are a number of foundations set up in connection with the Volkswagen litigation. Similarly in Petrobras, a Foundation has been established as a means of recovery for investors in Petrobras bonds, many of which were issued by Netherlands entities and which are traded across Europe.

4. Growing complexity requires increased analysis

Putting aside Australia and Dutch Foundations, how is the landscape changing in the rest of the world? Frankly, it’s becoming more complex, especially in jurisdictions like Germany, Japan, and the UK. Each of these jurisdictions may at any given point in time have multiple litigations underway but each of which also carries its own unique risk profile. How are investors handling this complexity? First, they’re familiarizing themselves with the 7-10 factors to consider in any jurisdiction – essentially developing a series of diligence questions to guide their participation calculus.

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4. Growing complexity requires increased analysis (continued)

Cost is usually the most germane factor to consider. It has a number of components: 1. Is the litigation being funded on a no-win, no-cost basis? 2. Who is the funder? What is its reputation and solvency? What are the terms of the funding

agreement? 3. Is there jurisdiction specific risk of adverse-party cost shifting? If so, has the funder explored that

risk? 4. Are legal costs capped? If not, have the parties considered third-party insurance in the event that

the costs exceed the funding commitment?

Again, the Fortis settlement for 1.2 billion in March of this year is a big win for the Dutch Foundation, particularly because the Fortis was a Belgian bank operating across Europe. It remains to be seen as to what role Foundations will play in 2017 for some of the ongoing cases. There are a number of foundations set up in connection with the Volkswagen litigation. Similarly in Petrobras, a Foundation has been established as a means of recovery for investors in Petrobras bonds, many of which were issued by Netherlands entities and which are traded across Europe.

CONCLUSION Global opt-in litigation and settlements have not only increased in terms of cases and active jurisdictions, but also in complexity and the degree of information necessary to make an informed participation decision. With the growing sophistication of global jurisdictions and continued maturation of litigation mechanisms across the globe, like Dutch Foundations, investors are faced with an array of aspects to consider. The growing complexity of the global litigation landscape requires increased analysis to ensure investors are diligent in addressing the recovery opportunities that securities settlements outside of the U.S. present.

ABOUT FINANCIAL RECOVERY TECHNOLOGIES Financial Recovery Technologies (FRT) is a leading technology-based services firm that helps institutional investors identify eligibility, file claims and collect funds made available in securities class action settlements and litigations impacting global investors. Offering the most comprehensive range of services, we provide best-in-class eligibility analysis, disbursement auditing and client reporting. We deliver the highest level of accuracy, accountability and transparency available to a wide range of institutional investors including hedge funds, investment managers, custodians, public and private pension funds, and wealth managers. Financial Recovery Technologies is a Cross Country Group company (www.crosscountrygroup.com). For more information, go to www.frtservices.com or email info@frtservices.com.

ABOUT FRT GLOBAL FRT Global is designed to meet the growing demand for research and analysis on non-U.S. settlement and recovery opportunities. FRT’s team of professionals possesses the necessary insight, relationships and expertise to assist you in successful international claims recovery. The company’s FRT Global suite of services include analyzing trading history for relevant transactions, coordinating with litigation organizers in different countries, supporting the processing and submitting of transactions, and researching specific case and jurisdiction requirements.