GAME OF DRONES

y amy armstrong
Capturing Past
Security Losses
with Attention
to Detail
Over the last 10 years more than
$60 billion has been distributed to
shareholders as payouts from class
action settlements in securities litigation.
That is certainly a number big enough
to get one’s attention, but what is more surprising
is that most experts estimate that 50%
or more of all eligible claimants in these settlements
do not file and collect what is rightfully
theirs. Instead, the money gets reallocated to
those investors who do file.
Making matters worse is that most of those
who file are big institutional investors who
have service providers like custodial banks
and others who look out for them in this area.
Retail investors, who by most estimates make
up 30% of the market, have no one trying to
help them, and as a result it is estimated that
more than 80% of retail investors are left out
in the cold, with there money instead going to
the big institutions.
One company is making it a mission to
change that paradigm and bring service to
this previously under-served set of customers.
Financial Recovery Technologies, one of
the leading service providers to major institutions,
is exploring how they can adapt their
services to monitor, file and recover funds –
currently tailored for institutional clients with
large pools of capital – for the needs of clients
with smaller dollar amounts to claim.
According to company president Rob Adler,
his firm Financial Recovery Technologies
(FRT), founded in Medford, MA in 2008, is
taking a long look at how to serve the 30 percent
of the class action litigation market that
is viewed as “retail” or individually managed
accounts versus those of large institutions.
“Almost all of the service providers, such as
FRT, have historically only been able to provide
a service in a cost effective manner to the
institutional client,” Adler said. “One of the
goals for the future is whether anybody can
help the smaller client recapture securities
losses.”
Adler explained that there are many claims
going unfiled each year. This trend, he suggests,
is more concentrated in the sphere of
the smaller investor and is due to the nature
of the securities trade business.
“Investors tend to live very much in the
present. They are worried about performance
now,” Adler said. “When a claim settles, it is
usually for a case stemming from trading that
took place five to seven years ago. It is not
even on their radar screen.” This is particularly
true for smaller claims – ones that are only
a few hundred million dollars or even less
spread across an entire class of litigants.
“These tend to fly under the radar. If you
are not actively and intentionally monitoring
or paying attention, they can slip by,” Adler
explained.
Attention to these claims represents Adler’s
greatest successes and greatest challenges
in this business. In a typical year, about two
hundred cases involving securities claims
are filed. Admittedly, it’s an opaque process
heavy on details that go back in time, tending
to be a gray, murky area requiring a lot of attention
to detail in order to produce a successful
outcome.
Recouping past losses is only one small
part of a client’s much larger total investment
package. Recouping is something a busy client
does not always wish to undertake, especially
because of the investment in time it
takes to garner the many details necessary to
THE SUIT MAGAZINE - DEC / JAN 2014