It is a common understanding that investors, through the class action litigation process, can attempt to offset losses from allegations of fraud against publicly traded companies. In fact, during the last decade, U.S.-based class action settlements returned an incredible sum of $50 billion back to shareholders.
ISS Securities Class Action Services helps its clients with a second opportunity, often not fully understood, that will sometimes allow investors to potentially recover lost assets. This additional mechanism comes from Section 308(a) of the Sarbanes-Oxley Act of 2002. This landmark legislation, also referred to as the “Public Company Accounting Reform and Investor Protection Act,” empowers the U.S. Securities and Exchange Commission with the ability to create a “Fair Fund” – a provision that allows the distribution of a company’s wrongful profits (disgorgements), penalties, and fines back to defrauded investors. In short, the creation of a “Fair Fund” benefits investors who lost money due to illegal or unethical activities from companies (or individuals) that violate securities regulations.
(Prior to the creation of a “Fair Fund” in Sarbanes-Oxley, civil penalties against publicly traded companies recovered by the SEC were disbursed to the U.S. Treasury, as the governing body lacked distribution rights of these funds back to harmed investors.)
More often than not, the SEC’s Fair Fund is based upon allegations against a company where a class action settlement has already occurred. This allows investors to participate twice – potentially recovering added funds from the same set of securities violations.
In fact, SEC Fair Fund settlements can often be significant and are frequently managed just like a traditional class action – meaning investors must submit a claim form prior to a specified date in order to receive a recovery. Other times, the SEC will partner with the Claims Administrator from a previously settled class action, which allows investor claims already submitted to be used for the Fair Fund.
Noteworthy SEC Fair Fund settlements from the past few years include:
| COMPANY NAME | SETTLEMENT AMOUNT | ALLEGATION |
| Wells Fargo | $500 Million | Widespread Unlawful Sales Practices (Fake Accounts Scandal) |
| Stanford Int’l Bank | $128 Million | False & Misleading Statements (Promising Improbable High Interest Rates) |
| Petrobras | $85.3 Million | “Operation Car Wash” (Kickbacks to Executives & Politicians) |
| Tesla | $40 Million | False Statements by Elon Musk (Via Twitter – Taking Tesla Private) |
| American Realty Capital | $34.1 Million | Material Misstatements & Omissions (Related to two Mergers) |
| Longfin Corp. | $26.1 Million | Conducting Sales through Unregistered Distributions |
Additionally, a list of the top ten all-time SEC Fair Fund settlements are below. These ten actions delivered $5.1 billion back to investors. While these recoveries represented only a fraction of investor losses, we at ISS Securities Class Action Services believe the U.S. Congress properly empowered the SEC with the passage of Sarbanes-Oxley.
To view a larger list of SEC Fair Fund settlements, click here (a list of the 50 largest SEC Fair Fund settlements is included within “The Top 100 U.S. Class Action Settlements of All-Time” report, an annual publication by ISS Securities Class Action Services).
| Rank | COMPANY Name | Settlement Year | Total Settlement Amount |
| 1 | American International Group, Inc. | 2008 | $800,000,000 |
| 2 | WorldCom, Inc. | 2003 | $750,000,000 |
| 3 | Wyeth/Elan Corporation, plc | 2016 | $601,832,697 |
| 4 | BP p.l.c. | 2012 | $525,000,000 |
| 5 | Wells Fargo & Company | 2021 | $500,000,000 |
| 6 | Stanford International Bank Ltd. | 2019 | $463,753,165 |
| 7 | Enron Corp. | 2008 | $450,000,000 |
| 8 | Banc of America Capital Management, LLC | 2007 | $375,000,000 |
| 9 | Federal National Mortgage Association | 2007 | $350,000,001 |
| 10 | Invesco Funds | 2008 | $325,000,000 |
ISS Securities Class Actions will continue to support its clients with the proper coverage of SEC Fair Fund settlements – delivering full case profiles within the RecoverMax platform as well as submitting all eligible claims as directed by the terms of each settlement.
By Jeff Lubitz, Executive Director, ISS Securities Class Action Services
