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Questions and Answers

What is a Class Action?
How is a class constituted?
Why a Class Action?
Is the custodian not doing the same as Clarese?
Is it not my Asset Manager’s job to watch the Class Actions?
Can a Class Action also carried out via investment-funds?
Why do business with this lawyer’s office?
What is a ‘lead plaintiff’?
Has Class Action to do with Corporate Governance?
Does a Class Action damage the shareholder’s interests with the Corporate Governance?
Is Class Action applicable for shares only or also for business-debentures?
How is a procedure conducted?
  
How is Class Action appreciated in the United States?


What is a Class Action?
A Class Action is a legal procedure (‘action’) taken by a group of Asset Managers (‘class’) against a company in which they have invested and which company has acted contrary to the rules, or which is suspected to have done so, with the purpose to compensate the losses the assets have suffered as a result of these irregularities.

How is a class constituted?
Specialised lawyer-offices and internet-sites publish information about companies against which Class Actions are considered. They invite duped parties to take part. The largest parties act as main-claimers or ‘lead plaintiff’.

Why a Class Action?
Via a Class Action an Asset Manager can endeavour to compensate (a part of) the damage caused by losses as a result of mismanagement by the company in which the plaintiffs had invested. This approach does not entail an additional financial risk because as arule the lawyers-office works on a no-cure/no-pay basis and thus serves the interest of the shareholder.
By working together with the other duped parties your chances on success are increased and the costs, compared with those when acting alone, are decreased.

Is the custodian not doing the same as Clarese?
A custodian will inform you about running Class Actions when you requested this. The custodian will not systematically and periodically inform you about potential occurrences, he does not offer the possibility to acquire a position as ‘lead plaintiff’ and does not facilitate the information-exchange between you and the lawyers-office. In short: the custodian provides a different product altogether.

Is it not my Asset Manager’s job to watch the Class Actions?
Dependingon what you have agreed with your external asset managerhe will probably be more focused onhis mission, i.e.reaching a high return on investment rather than starting legal procedures.
Besides, the running of a legal procedure on behalf of your organisation is a job best done by yourself.

Can a Class Action also be taken via investment-funds?
A financial institution can only take a legal action to court about damage to or losses on shares owned by the organisation itself.
When an organisation has invested in an investment-fund that is taking part in the company concerned, it is not possible for the financial institution to take part in a Class Action. The financial institution can urge the investment fund or even bind it by contract to take part in a Class Action itself.

Why do business with this lawyers office?
The lawyer's office that will be filing your class action, is world-marketleader in Class Actions en is excellently equipped to do research etc. It is possible however that –based on the information provided to you by Clarese- you may decide to do business with another lawyers office. In that case Clarese will not facilitate you in the further development of the procedure.

What is a ‘lead plaintiff’?
The lead plaintiff is Main Claimant in the Class Action. The lead plaintiff has a great influence on the further progress of a case with regard to questions i.e. coming to an agreement with the company concerned.

Has Class Action to do with Corporate Governance?
Corporate Governance focuses on transparent and honest management with tangible influence of the shareholders on the strategic policy of a going concern. Thus shareholders can have a large influence on ‘desirable conduct’ of a company. Class Action focuses on companies guilty of violating prevailing standards, especially companies suspected of fraud.
The similarity between Class Action and Corporate Governance is that in both cases the shareholder deals with the conduct of the company. The main difference is that Class Action will only be taken in case of undesirable and punishable conduct of the company.

Does a Class Action damage the shareholder’s interests with the Corporate Governance?
In general it cannot be stated that the position of the shareholder in Corporate Governance will be damaged by a Class Action against the same company. Understandably it will not benefit the relationship. On the other hand it is not reasonable to expect an asset manager to forfeit a claim to protect the interests entrusted to him with the purpose of not hurting the good relationship with the company he invests in.

Is Class Action applicable for shares only or also for business-debentures?
Class Action can also be taken in relation to business-debentures.

How is a procedure conducted?
Roughly speaking the procedure goes as follows:

  • The lawyer's office periodically provides Clarese with information on potential cases (possible fraudulent companies in which financial institutions could have invested), which will be monthly forwarded to companies subscribing to Clarese.
  • The back office of the financial institution reports back to Clarese if during the class-period (i.e. the period in which the fraud was committed or became known and during which the losses to the institution were caused) if they had shares, how many, purchase price (and possible selling price) Clarese monitors this information-process.
  • Clarese compiles the information and groups the information per potential Class Action. Clarese informs the lawyers office which decides whether a procedure is advisable.
  • In that case the lawyers office sends a form to Clarese which forwards it to the financial institution interested in a possible procedure. By signing this form the institution grants the lawyer's office consent to take legal action on their behalf. Clarese monitors that this assignment is properly handled by the lawyer's office.
  • A period then starts during which an intensive investigation is made by the lawyer's office, followed by the actual legal procedure (often however resulting in a settlement) On average this process may last 3 to 5 years. It is possible that during this period additional consultation between the lawyers office and the financial institution becomes necessary. Clarese then again plays a coordinating role.
  • After the verdict or the settlement Clarese receives all information and makes sure the plaintiff receives its claim.

How is Class Action appreciated in the United States?

  • Congress, lawyers and the Government Supervisor support the institution of Class Action, among other things because it is an easily accessible way of litigation and because it supports the trust in the marketmechanism.
  • The US Department of Labour considers the refraining by the Asset Manager from taking a Class Action contrary to the trust invested in him to be so serious that it (the DOL) will take action.
  • The Organisation of Asset Managers considers the possibility of Class Action to be vital for the protection of its interests.