How Are Losses Calculated in a Securities Fraud Class Action Case? 

Investors rely on the public information that companies release when making investment decisions, but this information is sometimes misleading or false. When the company corrects its misstatements or the truth is revealed through other sources, the stock price usually drops. Securities fraud class action lawsuits arise when investors lose money due to a company’s deception.

Investors often wonder how losses are calculated in a securities fraud class action case. The process is more complicated than you might think, but Silver Law Group attorneys are skilled at advocating for investors across the country to ensure any settlement compensates them appropriately based upon precedent and the federal securities laws

Loss Calculation Depends On Multiple Factors Including The Type of Securities Fraud

There are several ways that companies, and the law firms and accountants that work with them, can defraud investors. The specific law the company violates dictates the way that investors’ losses are calculated. A securities fraud lawyer can help you understand the losses you may claim.

Section 11 Claims

Section 11 of the Securities and Exchange Act of 1933 requires companies to register their securities with the Securities and Exchange Commission (SEC) before offering them for sale. When a company provides false or misleading information in a registration statement or omits relevant information, investors have a right to sue the company officers and anyone who helped prepare the registration statement. Investors can seek the difference between what they paid for the stock, and the price they obtained when selling it.

Section 12 Claims

An investor who relied on false or misleading statements or relevant omissions in a prospectus could sue under Section 12 of the Securities and Exchange Act. Losses under Section 12 are the purchase price of the stock minus any dividends, interest, or funds obtained through a later sale of the securities.

Section 10b Claims

A company violates Section 10b of the Securities and Exchange Act when it engages in deception or misinformation to manipulate a stock price. Law firms, accounting firms, investment advisors, and others can also be liable for 10b violations.

Investors who lost money because of a scheme to conceal the company’s true position can claim losses based on the difference between the amount they paid for the stock and the amount the stock dropped when the truth about the company was revealed. However, they must be able to draw a connection between the correction/disclosure and the stock price drop. The calculation can get complicated when the company engaged in multiple attempts to mislead, and revelations of wrongdoing emerged over time. Other factors also can impact the calculation.

External Factors On Securities Fraud Losses

Attorneys for the plaintiffs and defendants often engage in vigorous negotiation over the amount of the settlement. Although it is relatively simple to calculate the amount investors lost due to the change in stock price, factors other than the fraud may have depressed the price. If the market went down overall during the class period, or a particular sector declined, the company might insist that the settlement reflect the overall reduction in market value.

Plaintiffs might argue for a larger settlement due to the reputational damage the company suffered because of the fraud. Those investors who did not sell the stock when the price declined now hold a riskier investment and might expect enhanced returns amongst other factors.

Silver Law Group Can Help Calculate Class Action Losses From Securities Fraud

When you lost money in the market due to fraud, you have the right to sue. Securities fraud class action lawsuits are the most efficient way for many investors to recoup their losses.

The attorneys at Silver Law Group represent investors anywhere in the U.S. who lost money. They can explain how losses are calculated in a securities fraud class action case, so call today to learn more.