Glossary Of Securities Terms

Absent Class Member 
A member of a class that is not named in the complaint and does not actively participate in the litigation. 
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Adequacy
Adequate representation of the Class’s interests. A Class Member that wants to take a representative role in a Class Action must establish that it can adequately represent the interests of the class pursuant to Federal Rule of Civil Procedure 23. 
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Attorneys’ Fees
Payment for legal services. At the successful conclusion of a class action, the court determines the amount of attorneys’ fees based on time expended, quality of representation, and result achieved. In individual suits, the plaintiff and attorneys agree on the amount of attorneys’ fees (generally a percentage of the recovery). 
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Certification
Confirmation signed by an investor seeking appointment as Lead Plaintiff or Class Representative establishing its suitability under the provisions of the Private Securities Litigation Reform Act ( PSLRA). 
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Claim
A basis for a demand, an assertion in a complaint, a title or right. 
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Claim Form
A form used by class members seeking compensation from a settlement or Class Action judgment. 
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Class
All parties who have suffered substantially the same harm by the conduct of the wrongdoer or wrongdoers named in the complaint. Only class members can seek compensation following a Class Action judgment. 
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Sub-Class
A group made up of some, but not all members of the class. The members of a sub-class have common characteristics that not all members of the class share. 
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Class Action
A lawsuit in which a single person or small group of people represents the interests of a larger group. The Securities Litigation Standards Act of 1998 (Uniform Standards Act) defines class action in three alternative ways and, by definition, excludes some cases from the federal venue requirement. A class action, with regard to any single suit, is an action on behalf of 50 or more parties with a common question of law or fact, and without inquiry into individual reliance on an alleged misstatement or omission. A class action also exists when one or more parties represent an unnamed group of individuals who share a common question of law or fact that predominates over any questions affecting the individual parties. When dealing with a group of lawsuits filed or pending in the same court, a class action evolves when the suits of 50 or more parties which share a common question of law are joined or consolidated. “Mass actions” are included in the definition of class action. 
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Class Action Settlement
An agreement reached by the parties to a class action lawsuit, usually in writing and/or read into the record in court, settling all issues. Usually there are elements of compromise, waiver of any right to reopen or appeal the matter even if there is information found later which would change matters (such as recurrence of a problem with an injury), mutual release of any further claim by each party, a statement that neither side is admitting fault, and some action or payment by one or both sides. In short, the case is over, provided that the parties act in accordance with the final settlement’s terms. Judges encourage attempts to settle, including requiring mandatory settlement conferences with judges or experienced settlement attorneys present. The majority of class action lawsuits end with either a ruling that the case has no merit or a settlement; very few class action lawsuits proceed to trial. 
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Class Certification Motion
A formal request made to a judge for an order that a lawsuit may proceed as a class action (Certification).
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Class Certification Order
A court order stating that a Class can be established and setting forth the scope of the Class. 
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Class Counsel (Lead Counsel)
An attorney or group of attorneys appointed by the court to provide legal representation to the class. In a Securities Class Action the Lead Counsel is the attorney of the Lead Plaintiff.
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Class Member
In a Securities Class Action, all investors who traded securities of the relevant company during the Class Period and suffered losses as a result. 
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Class Period
The time frame during which it is believed the alleged fraud or other securities law violations artificially inflated the price of the stock at issue in the case that falls within the relevant statutes of limitations. Only losses suffered in this time period (while the fraud was being perpetrated) are subject to compensation. The class period is initially determined by plaintiffs’ counsel after research and investigation. Class periods may change during the course of the litigation based on additional information revealed during the discovery process.
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Class Representative (Lead Plaintiff)
The named plaintiff who has been selected by the court to represent the class. Class representatives must satisfy the Adequacy and Typicality requirements of Federal Rule of Civil Procedure 23. 
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Commonality
The issue of fact or law, the resolution of which will affect all or a significant portion of the class.
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Common Fund
A fund established after a settlement for the distribution of compensation to class members.
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Compensation
The amount received after a loss, paid by the party causing the damage (frequently through insurance).
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Compensatory Class
A class seeking monetary damages (or one in which monetary damages have been recovered). 
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Complaint
A document filed with the court by a party claiming legal rights against a wrongdoer.
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Conduct Test
Court applied test which determines whether conduct within the United States is alleged to have played a part in the perpetration of a securities fraud on investors outside of the United States.
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Contingent Fee, Contingency Fee 
A payment to a lawyer payable upon successful conclusion of the case. Contingency fees in securities class actions are determined by the court and are generally based on time spent, quality of representation, result, or are a percentage of the settlement or judgment. 
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Corporate Governance
Set of processes, customs, policies, laws and practices affecting the way a corporation is directed, administered or controlled. Corporate governance also includes the relationships among the many parties involved (the stakeholders) and the goals for which the corporation is governed. 
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Damages
Loss, injury, or harm suffered by reason of the breach of duty alleged in the complaint. 
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Damages Class Action
A class action lawsuit seeking compensation for accrued losses.
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Decertification
An action taken by a court (usually an appellate court) to reverse a previous decision that permitted a case to proceed as a class action.
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Declaratory Judgment
A determination specifying the rights and obligations of the respective parties to a litigation.Declaratory judgments are rarely issued.
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Defendant
The party sued in a civil lawsuit or the party charged with a crime in a criminal prosecution (the alleged wrongdoer.)
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Deposition
A pre-trial out-of-court oral examination of a witness under oath. A deposition is a component of the pre-trial gathering of evidence (Discovery) that is obtained by attorneys on behalf of the parties to a lawsuit. The purpose of a deposition is to obtain sworn testimony from an opposing party (Defendant or Plaintiff), a witness to an event, or an expert intended to be called at trial. The testimony is recorded by the court reporter, who will prepare a transcript that assists in trial preparation and can be used in trial either to contradict (impeach) or refresh the memory of the witness, or be read into the record if the witness is not available. 
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Derivative Action
A shareholder derivative action is a lawsuit instigated by a shareholder of a corporation, not on the shareholder’s behalf, but on behalf of the corporation against the parties that allegedly caused harm to the corporation. Derivative suits often are brought against officers or directors of a corporation for violations of fiduciary duties owed to the shareholders.
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Determination of Damages
The determination of recognizable losses during a class period; losses due to the securities law violations alleged.
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Discovery
The pre-trial phase of a litigation in which evidence is gathered pursuant to which the parties, through their attorneys, obtain information through demands for production of documents, depositions of parties and potential witnesses, written interrogatories (questions and answers written under oath), and written requests for admissions of fact. The process takes place largely without court participation, although the court defines the scope of permissible discovery. Discovery is meant to ensure that no party to a case will successfully conceal pertinent information, allowing cases to be pursued with as much knowledge of the underlying facts as possible.

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Exclusion Request
A request by a class member to be excluded from the class.

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Executive Committee
A group of lawyers representing a group of parties, usually the plaintiffs, who collectively meet, assign work, and make strategic decisions in complex litigation. Lead counsel generally oversees or heads this committee. 
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Fairness Hearing
A court hearing in which the “fairness” of a proposed settlement is evaluated by the court and any objections to a proposed settlement are heard. To approve of a Class Action settlement, a court must determine that a settlement is “fair, adequate, and reasonable” pursuant to Federal Rule of Civil Procedure 23.
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FIFO (First In - First Out)
Loss analysis method of accounting for the purchase and sale of securities in which the first securities purchased are presumed to be the first securities sold. 
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Hearing
Any proceeding before a judge or magistrate, without a jury, in which evidence and/or argument is presented, usually to determine a distinct issue or set of issues of fact or law (or both). 
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Individual Lawsuit, Individual Action 
An action by a single person or entity (as distinguished from a class action). 
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Injunction
A writ (order) issued by a court ordering a party to do something or prohibiting some act. Injunctions are generally issued only after a court hearing. 
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Institutional Investor
Large investors (such as mutual funds, pension funds, and insurance companies) that invest largely other people’s money.

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Interlocutory Appeal
An appeal of an interim order of the court of first instance. Since appeals generally are only allowed after a final order resolving the entire case, a party seeking an interlocutory appeal must first ask the court of first instance to allow the interlocutory appeal.
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Intervene
An action in which a party that is not named in the litigation (such as an absent class member) seeks court approval to join in the suit as a named party. 
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Lawsuit
Any proceeding by a party of parties against another in a court of law.
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Lead Counsel (Class Counsel)
Attorney or attorneys who manage a class action or multidistrict litigation. The lead plaintiff selects the lead counsel subject to approval of the court. The lead counsel is responsible for management of the litigation and owes a fiduciary duty to all members of the class.
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Lead Plaintiff
A representative of the class. (Class Representative). The Lead Plaintiff is appointed by the court to represent all members of the class (Class Members), and works with the court-appointed Lead Counsel to determine how the litigation should proceed and eventually be resolved. The resolution of the case by Lead Plaintiff, if approved by the court, is binding on Absent Class Members. Under the PSLRA, the Lead Plaintiff is selected by the court based on the size of its economic interest in the outcome of the litigation, and its Adequacy as a representative of the Class. The Lead Plaintiff is responsible for choosing, directing and supervising Lead Counsel and is required to stay informed of all material developments and adequately represent the interests of all class members.
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Lead Plaintiff Motion
The formal request made to a court to be appointed Lead Plaintiff.
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Liaison Counsel
An attorney responsible for facilitating communications between the respective parties and the court in complex litigation. 
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LIFO (Last In - First Out)
Loss analysis method of accounting for the purchase and sale of securities in which the last securities purchased are presumed to be the first securities sold. 
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Limited Fund
Settlement fund with a limited amount. Limited Fund settlements are agreed to in cases in which the defendant(s) do not have adequate funds to fully compensate for the harm done.
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Litigation 
The process of carrying on a lawsuit.
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Lodestar
A method of determining attorney’s fees based on time spent on the case. In some instances, the court may award attorneys a Multiplier based on the circumstances of the litigation and the quality of services performed. 
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Lookback Period
The 90 day period following the end of the Class Period. Under the Private Securities Litigation Reform Act (PSLRA), a plaintiff may not recover more than the difference between the purchase price and the mean trading price of the stock during the lookback period. 
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“More than Merely Prepatory” 
Provision of the Conduct Test required to establish jurisdiction over the claims of foreign investors who purchased shares of a foreign company on a foreign exchange. A United States court may assert jurisdiction in those cases when a “more than merely prepatory” part of the fraud took place in the United States.
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Motion
A formal request made to a court for an order or judgment. Most motions require a written petition, a written brief of legal reasons for granting the motion (often called “points and authorities”), written notice to the attorney for the opposing party, and a hearing before a judge. However, during a trial or a hearing, an oral motion may be permitted.
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Motion to Dismiss
A motion that asks the court to decide that a claim, even if true as stated, is not one for which the law offers a remedy. The pleading requirements for securities actions were significantly raised by the PSLRA so that securities complaints must be pled in far more detail than most other United States complaints. As a result, a far higher number of securities actions are dismissed than other types of actions.
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Multiplier
A factor, sometimes used by a judge, to calculate the attorneys’ fees. In some instances the Lodestar will be multiplied by that factor, if the judge finds that the performance of the attorneys seeking fees was excellent. 
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Named Plaintiff
A person or entity who sues on behalf of a group of plaintiffs in a class action.
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Notice of Settlement
Notification to Class Members of a proposed settlement. 
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Numerosity
Necessary number of Class Members. The plaintiffs must establish that the number of class members is so large that individual actions would be inefficient. Numerosity is required for an action to proceed as a Class Action.
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Objector
An individual who opposes some aspect of a proposed settlement of a Class Action. 
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Opt In
Join a Class. Although the norm is that all parties similarly situated with respect to the claims asserted are automatically members of the class, on rare occasions, a Class Action requires the Class Members to affirmatively join the class.
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Opt In Class Action
A class action in which Class Members must affirmatively seek inclusion Opt In. 
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Opt Out
Exclude oneself from the class. All Class Members whose rights will be affected by a Class Action Settlement may elect to exclude themselves (Opt Out) at any point in a class proceeding until a settlement is approved by the court or a judgment is rendered. A party generally seeks exclusion from the class when it intends to file an individual action. 
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Out-of-Pocket Expenses
Direct outlays of cash; expenses paid from a law firm’s own funds. In the event a case is successful, the attorneys seek both fees and reimbursement of their Out-of-Pocket Expenses.
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Plaintiff
The party who asserts a claim in a court.
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Pleading
A formal document in which a party to a legal proceeding sets forth or responds to allegations, claims, denials, or defenses. In federal court, the main pleadings include the plaintiff’s claim and the defendant’s answer. 
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Private Securities Litigation Reform Act (PSLRA)
The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation, fees, and expenses. The PSLRA sought, among other things, to professionalize the Lead Plaintiff selection process in Securities Class Actions by encouraging Institutional Investors to become Lead Plaintiffs.
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Proof of Claim and Release
Form for submission by Class Members seeking compensation from a Settlement Fund and providing a release of liability to the participating Defendants. 
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Recovery
The amount of money and any other right or property received by the Plaintiffs as part of the resolution of a lawsuit.
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Securities
Shares representing an investor’s ownership interest in a corporation. Securities can be in the form of, among others, shares, bonds, debentures, options, promissory notes, certificates of interest in profit-sharing agreements, fractional undivided interests in mineral rights, and investment contracts.
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Securities Case
Lawsuit based on violations of U.S. securities laws.
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Securities Class Action
A Class Action based on violations of U.S. securities laws.
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Securities Class Action Complaint 
A document filed with the court by a party claiming legal rights based on U.S. securities laws.
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Settlement
The resolution of a lawsuit that occurs prior to a final court judgment. Most settlements are achieved by negotiation in which the attorneys and the parties agree to terms of settlement. Class Action settlements require court approval, and the court must determine that a proposed settlement is “fair, adequate, and reasonable” before issuing a final judgment of approval of a settlement.
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Standing
The right to assert a legal claim before a court, file a lawsuit, or seek judicial enforcement of a duty or right. 
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Summary Judgment
A court order ruling that no relevant factual issues remain in dispute and that all or a part of the case can be decided without a trial. 
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Trial
A formal examination of facts and law in an adversarial proceeding. 
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Typicality
The nexus between the Class Representative’s claims and the questions of fact or law that is common to the Class. A nexus sufficient to establish the appropriateness of joining the claims of all Class Members into a Class Action is established if the claims or defenses of the class and those of the class representative arise from the same events or practice and are based on the same legal theory.
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