Securities Litigation & Class Action Trends ―2016 Year in ReviewBy Financial Recovery Technologies

Global, Antitrust and U.S. Securities Class Action

Institutional investors have moved beyond

traditional U.S. securities litigation efforts to

focus on damages from antitrust violations and

non-U.S. jurisdictions, according to research from

Financial Recovery Technologies (“FRT”), a leading

securities class action recovery services provider.

Its report, Securities Litigation & Class Action

Trends – 2016 Year in Review, found that in 2016,

institutional investors recovered billions in global

and antitrust settlements as investors saw an

increased opportunity in these emerging areas of

class action litigation.

TABLE OF CONTENTS• Global• Antitrust• U.S.

2016 YEAR IN REVIEW

Global Opt-In Litigation & Settlements

The global securities litigation landscape continues to grow and evolve. 2016 saw a record number of global opt-in actions filed – nearly a 56% increase from 2015. We’re closely monitoring an uptick in activity across the globe and a number of emerging jurisdictions, like Taiwan. Within jurisdictions that have been consistently active, like Australia, we’re seeing more parties involved (litigation funders, law firms, investment recovery firms), as well as new and inventive causes of action. Most importantly for our clients, these changing dynamics are complicating the participation analysis – there is a seemingly limitless number of factors that institutions should weigh before deciding whether to get active in a jurisdiction. While global securities litigation cases have been prevalent in recent years, some noticeable trends emerged in 2016 that look poised to continue throughout 2017.

GLOBAL TRENDSONE: INCREASE IN NUMBER OF CASES AND ACTIVE JURISDICTIONS Let’s turn to the global or opt-in trends we’ve seen over the past year. At a high level, 43 new actions were brought in 9 different jurisdictions. The interesting thing about global cases is, often times there are multiple actions filed against the same defendant by multiple litigation organizers. We count these as more than one separate case, because they represent separate opportunities for investors to recover on their losses. Volkswagen is a great example. In 2016, there were three actions proposed in Germany, and two in the Netherlands, both in an effort to vindicate investors in Volkswagen securities traded outside the United States.

Other trends related to jurisdictions and the growing number of cases include:a. Taiwan continues to be the most active jurisdiction in terms of

case count, with at least 18 new actions proposed last year. b. Australia is a close second with 13. We discuss in the next

section why Australia is an increasingly important jurisdiction for institutions to monitor.

c. March was the most active month last year, with 7 new global actions proposed in 5 separate jurisdictions.

d. We witnessed a number of global settlements – like the $1.2B Fortis case, the largest ever through Dutch collective settlement procedures. We also saw a number of settlements in Australia, including OZ Minerals and Newcrest Mining.

WHAT ARE “GLOBAL CASES?”At Financial Recovery Technologies, we refer to “global cases” as securities litigation arising outside the U.S. and Canada that represent opt-in litigation opportunities. These actions are called “opt-in” cases because investors must affirmatively join a lawsuit in order to recover damages. That’s not the case in the U.S. and Canada, which operate under an opt-out system whereby investors are presumed to be a member of the settlement class unless they affirmatively choose to opt out of the class.

0 5 10 15 20

Australia

Germany

Japan

Netherlands

Portugal

Spain

Taiwan

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Italy

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2016 Global Cases By Jurisdiction

TWO: DEVELOPING SOPHISTICATION OF GLOBAL JURISDICTIONSAs noted earlier, group action regimes outside of the U.S. and Canada are becoming increasingly sophisticated, meaning: a. Jurisdictions are adapting to include more market

participants.b. More cases are being filed. c. There’s a stronger track record of recoveries.d. Damage methodologies are now becoming broadly accepted,

allowing for greater predictability in terms of recoverable amounts relative to the overall damages.e. Perhaps most importantly, the more sophisticated regimes have made it easy for investors to participate, recognizing

the risk factors that the institutional community considers before becoming involved in an opt-in scenario.

Australia is front and center among those jurisdictions that are responding to institutional interests. In fact, Australia’s group action regime has matured so much that many institutional investors are beginning to view it similar to the U.S. or Canada – meaning they perceive no risk in participating in a given case, provided they have any potential losses.

There are a number of reasons why this is the case:1. In Australia, non-lead claimants are shielded from the risk of adverse-party cost shifting. This means there’s no risk

that, in the event the case is unsuccessful, that the legal costs of the prevailing party would be placed on the claimants.

Global Opt-In Litigation & Settlements

AUSTRALIAN CLASS ACTION REPORTClick here to read FRT’s report to learn which catalysts have driven Australian class actions to account for nearly one-third of all new international filings.

GLOBAL CASE SPOTLIGHT – VOLKSWAGENClick here for a brief video on the Volkswagen litigation that highlights the complexity of a non-U.S. cases and the impact Dutch Foundations may play in future global litigation.

And because litigation funders underwrite the costs of the entire litigation as it proceeds for a potential future success fee, there’s no upfront cost either.

2. Australia essentially guarantees complete anonymity for participating claimants. There is little to no risk that an institution’s identity will be disclosed to the defendant corporation in the course of settlement discussions or to the public at large. This is a very important factor in the participation calculus of many institutions.

3. Class actions in Australia do not employ any form of discovery procedure in the way that we do in the U.S. This is an equally important factor for institutions – there’s no risk of burdensome document production, and no risk that your portfolio manager will be hauled down to Federal Court in Australia to testify.

4. For these reasons and several more, many institutions are taking the position that if they have any losses whatsoever in Australian opt-in cases, they’ll willingly join.

THREE: CONTINUED RISE OF DUTCH FOUNDATIONSAnother interesting development in the Global landscape over the past several years is the rise of Dutch Foundations. Dutch Foundations arise in the Netherlands, and are essentially voluntary vehicles established for the purpose of settling claims across multiple jurisdictions. They arose in the wake of Morrison, where the U.S. Supreme Court determined that securities claims against non-U.S. issuers with securities traded outside the U.S. must be litigated in their home jurisdiction. While Morrison paved the way for jurisdictions like Australia to develop their group litigation regimes, it also created a great deal of confusion in the case of broadly traded securities of Global corporations, particularly in Europe where they often trade

across multiple exchanges. The Dutch Foundations are a vehicle to resolve this confusion, by providing a collective forum within which parties can settle on a pan-European basis, with the implication that Netherlands courts have reciprocity across jurisdictions.

Again, the Fortis settlement for $1.2B in March of last year is a big win for the Dutch Foundation, particularly because Fortis was a Belgian bank operating across Europe. It remains to be seen as to what role Foundations will play in 2017 for some of the ongoing cases. There are a number of foundations set up in connection with the Volkswagen litigation. Similarly in Petrobras, a Foundation has been established as a means of recovery for investors in Petrobras bonds, many of which were issued by Netherlands entities and which are traded across Europe.

FOUR: GROWING COMPLEXITY REQUIRES INCREASED ANALYSISPutting aside Australia and Dutch Foundations, how is the landscape changing in the rest of the world? Frankly, it’s becoming more complex, especially in jurisdictions like Germany, Japan, and the UK. Each of these jurisdictions may at any given point in time have multiple litigations underway but each of which also carries its own unique risk profile. How are investors handling this complexity? First, they’re familiarizing themselves with the 7-10 factors to consider in any jurisdiction – essentially developing a series of diligence questions to guide their participation calculus.

Cost is usually the most germane factor to consider. It has a number of components:1. Is the litigation being funded on a no-win, no-cost basis?2. Who is the funder? What is its reputation and solvency? What are the terms of the funding agreement?3. Is there jurisdiction specific risk of adverse-party cost shifting? If so, has the funder explored that risk?4. Are legal costs capped? If not, have the parties considered third-party insurance in the event that the costs exceed

the funding commitment?

CONCLUSIONGlobal opt-in litigation and settlements have not only increased in terms of cases and active jurisdictions, but also in complexity and the degree of information necessary to make an informed participation decision. With the growing sophistication of global jurisdictions and continued maturation of litigation mechanisms across the globe, like Dutch Foundations, investors are faced with an array of factors to consider. Increased analysis is required for diligent investors to address securities settlement recovery opportunities outside of the U.S.

Global Opt-In Litigation & Settlements

How is the class action landscape changing around the world? Frankly, it’s becoming more complex.

Antitrust Class Action Litigation & Settlements

In recent years, institutional investors have moved beyond securities suits to recover damages from losses on investments covered by U.S. federal antitrust laws and the Commodity Exchange Act (CEA), or more simply, Antitrust Class Actions. Investor attention has focused on these matters in the wake of seemingly endless financial scandals affecting benchmark rates and their related instruments. Last year, nearly $2B was disbursed in settlement funds from the Credit Default Swap (CDS) Antitrust Litigation alone. This report discusses trends that emerged in 2016 and will likely continue throughout this year.

ANTITRUST TRENDSONE: INCREASE IN THE NUMBER OF ANTITRUST CASES IN THE U.S. AND GLOBALLY Antitrust litigation involves alleged misconduct affecting markets for non- securities instruments. In the U.S., there are currently more than 40 active cases in various stages of litigation. In eight settled ones, the administration process has been established and claim forms are available. The increased pace of domestic filings and settlements will likely continue in 2017. Most notably, the Foreign Exchange Rate (FOREX) Litigation has already recovered roughly $2B for damaged investors (claim forms expected mid-year), a figure that could grow significantly and rival the largest securities class action settlements if more defendants settle.

Additionally, institutions are beginning to consider antitrust matters in other countries, and as in the U.S., there is no shortage of opportunities. Like overseas securities actions, it seems most antitrust matters will be pursued either through Dutch Foundations or as “opt-in” litigation in particular countries. In many instances, cases are being organized by the same lawyers, investment recovery firms and funding organizations who are themselves actively seeking to diversify their scope as the securities area becomes more crowded and competitive.

TWO: COMPLEXITY OF ANTITRUST CASES LEADING TO LONGER ADMINISTRATIONS Complex settlement administrations: Relative to securities class actions, antitrust cases tend to involve more complex settlement administrations. Case counsel and administrators rely heavily on experts to assess damages and formulate distribution plans. These involve complex modeling to estimate artificial inflation of an instrument’s price or spread. Investors, organizers and

FOREX CASE SPOTLIGHTClick here to read FRT’s case spotlight on current partial settlements in the Foreign Exchange Benchmark Rate Litigation.

CASE SETTLEMENT AMOUNTS

Euroyen-Based Derivatives $58 m

BARX/Last Look $50 m

Forex $2 b

Silver Fixing $38 m

Gold Fixing $60 m

Euribor $139 m

ISDAfix $380.5 m

LIBOR $120 m

CURRENT ANTITRUST SETTLEMENTS

There are more than 40 active antitrust cases in various stages of litigation. The eight cases listed above have settlement pools available for recovery by investors.

administrators also have difficulty identifying and obtaining data for antitrust matters, which require more granular trading details, such as proof the trading counterparty was one of the defendants and details on spreads for covered instruments.

Identification of claimants’ domicile: Another factor leading to longer administrations is the process to determine if claimants are domiciled in the U.S and, if not, whether their transactions have a sufficient ‘nexus’ or connection to the U.S., in accordance with the Supreme Court’s Morrison decision. This complexity results in longer administration cycles for partial settlements. This is evident in the FOREX case for which recovery money (currently $2B) has been in escrow for more than a year-and-a-half while counsel and the administrator prepare for the distribution process.

Departure from simple proof of claim forms: In a departure from traditional blank proof of claim forms like those used in securities class actions, administrators in antitrust actions often develop an online claimant portal in which investors can access their trade history as constructed by the administrator. As an example, in the CDS case, the administrator relied on data acquired from the DTCC and from the settling defendants to extrapolate eligible claimant data. Investors can supplement information on the portal if they feel it’s inaccurate or incomplete. However, identifying trades in antitrust matters tends to be more difficult since there usually is no distinct security identifier and claim forms may only include a general description of affected instruments.

Going forward, length of administration may shorten a bit as antitrust matters become more prevalent and administration methods more predictable. On the back end, disbursement of settlement funds may be faster than in securities cases, likely months as opposed to years, like in the CDS case. The speed of disbursement will depend on how many claimants accept the administrator’s constructed transactions as accurate, requiring less processing effort by administrators.

THREE: RISE OF DUTCH FOUNDATIONS AND INCREASED DIRECT LITIGATION OVERSEASAs in foreign securities cases, Dutch Foundations are emerging as a mechanism to resolve overseas antitrust matters. In 2016, we saw Dutch Foundations for FOREX and other rate manipulation matters. These settlement vehicles are particularly

popular with U.S. law firms seeking involvement in overseas matters. Such firms typically aren’t licensed overseas and can’t directly prosecute cases in the countries where the defendants reside. This trend will likely accelerate in 2017.

Also outside of the U.S., financial scandals and resulting losses are driving many institutions to consider pursuing direct group actions, particularly where there is no class action mechanism available. By contrast, we have not witnessed investors in the U.S. opting-out of antitrust actions. This is presumably due to the lack of an accepted

damages methodologies and associated challenges of gathering data and quantifying losses in amounts that make individual suits attractive to the claimants and cost effective for the lawyers to undertake on a contingent basis.

FOUR: U.S. ATTORNEYS GENERAL ARE COMPETING WITH THE PLAINTIFF BARRegulatory enforcement proceedings by state Attorneys General against defendants could put a dent in antitrust class action recoveries. These out-of-court settlements differ from class action settlements in that they are not subject to preliminary or final court approval, fairness hearings or objection proceedings, and they do not involve a process for submitting proof-of-claim forms.

Antitrust Class Action Litigation & Settlements

GLOBAL LITIGATION REVIEWClick here to learn more about trends affecting global opt-in securities litigation and settlements.

Antitrust Class Action Litigation & Settlements

In the Barclays LIBOR case, for example, the state Attorneys General settled for $93.4 million and then notified claimants that in return for signing a release of their claims against Barclays, they would receive a certain amount from the recovery fund. In doing so, claimants forfeit their right to recover against Barclays in several pending class actions and in future cases not yet filed, and are precluded from bringing their own direct lawsuits against the firm. Stay tuned to see how this plays out in 2017.

CONCLUSIONAntitrust litigation is becoming more prevalent in the U.S. and internationally, and we expect this trend to continue through 2017. While not all antitrust cases receive significant publicity, there is a large pool of opportunities across the globe from which investors can attempt to recover their losses. But antitrust matters tend to be complex, which makes identifying and addressing antitrust litigation more challenging for investors than securities claim filings. As a matter of corporate governance, investors should evaluate the optimal approach for them to participate in antitrust actions, both in the U.S. and across the globe.

In the U.S., there are currently more than 40 active cases in various stages of litigation. Most notably, the Foreign Exchange Rate (FOREX) Litigation has already recovered

roughly $2B for damaged investors, a figure that could grow significantly and rival the largest securities class action

settlements if more defendants settle.

U.S. Securities Class Action Settlements

Last year, we saw a significant surge in U.S. securities litigation and class action settlement activity.

• Class actions filed against companies in the financial sector doubled last year, and cases against foreign issuers, especially European companies, were also on the rise, according to Cornerstone Research. Filings against S&P 500 firms reached a seven-year high, with one in 12 serving as a defendant during 2016. M&A objection filings quadrupled to 80 cases, a trend that has increased steadily in recent years.

• 2016 also saw the highest level of settlements reached since 2011 with an average settlement value of $50M. The ten largest settlements accounted for almost $4B. Settlements by Merck, Elan, BP, Pfizer and Bank of America worth $2.8B in aggregate value topped the list in 2016.

• While there was a record number of new cases filed, we saw a slowdown in the amount of time damaged investors received their recoveries from past settlements. It seems the longer claim administration time is being compounded by an increase in new settlements.

Financial Recovery Technologies expects these trends will continue due to an influx of new complaint filings in 2016, which should yield a growing pipeline of potential future settlements.

SECURITIES CLASS ACTION TRENDSONE: RECORD NUMBER OF CLASS ACTION CASES FILED Complaint-filing activity in U.S. courts was unusually high in 2016. In fact, last year was the busiest since 2001 in terms of new litigation, with filings in over 270 distinct matters comprised of more than 450 individual complaints. This is compared to fewer than 190 distinct matters in 2015 and 180 in 2014.

It remains to be seen whether this healthy pipeline will ultimately contribute to an increase in outstanding settlements. Historically the average settlement rate is 52% with the other 48% getting dismissed by the courts. Furthermore, the average settlement rate has been quite consistent in recent years so it seems likely that we will see a corresponding increase in settlements resulting from these filings in the coming years.

TWO: SETTLEMENT PIPELINE CONTINUES TO SWELLThe trend of increased litigation activity has had a direct impact on the number of outstanding class action settlements (cases that have settled but have yet to pay out to damaged investors). As seen in the chart on the right, there was a steady increase in the number of outstanding securities class actions in 2015 and 2016.

THREE: LONGER ADMINISTRATION PERIOD AFFECTING RATE OF SETTLEMENT DISBURSEMENTDespite the high volume and value of settlements, the number

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of disbursements has been exceedingly low in the last two years, with 72 cases paying out each year. This number contrasts markedly to the average for the five prior years, which was over 100 disbursements per year. This phenomenon seems to be related to an increase in the time it takes for claim administration to complete for any given case. As shown in the table at right, recent years have seen a marked increase in the number and percentage of cases taking over 400 days to complete their administration. In part, this may be attributed to a high rate of settlements creating a backlog in the system. 117 and 116 cases settled in 2015 and 2016 respectively, compared to an average 85 in the preceding five years.

FOUR: LOW RATE OF DISBURSEMENTS CAUSES RISE IN SETTLEMENT DOLLAR VALUE The backlog of cases is being compounded by a simultaneously low rate of disbursements, causing the value of outstanding settlement dollars to rise. As you can see in the chart at right, the pool of settlement funds available to investors has grown steadily with the number of cases in recent years. Significant growth in the overall settlement pool last year resulted from large settlements by Merck ($830M), Elan ($600M) and BP ($525M) in March and April, and settlements by Barrick Gold ($140M), Genworth ($219M) and MedPartners ($310M) during the summer. The dip in the overall settlement value occurred in the second half of 2016 when several cases with large settlements paid out, including Pfizer, Bear Stearns and Countrywide, which totaled a combined $1.4B in disbursements.

CONCLUSIONIn conclusion, there is no shortage of settlement dollars available. As of January 1, 2017, there was $11.25B of settlement funds awaiting disbursement, ready to be claimed by damaged investors. If the trend of longer claim administration continues, it will take time for the system to reach a new equilibrium between the number of new settlements and the number of disbursements. Assuming the rate of new filings and subsequent settlements continue at a high level, the pool of available settlement dollars will continue to grow.

OTHER NOTABLE TRENDS (Source: Cornerstone Research, Securities Class Action Filings – 2016 Year in Review)

• Federal filings of class actions involving merger and acquisition (M&A) transactions increased to 80, more than four times greater than in 2015.

• M&A filings had a higher dismissal rate than other filings from 2009 to 2015. During this period, 78 percent of these M&A filings were dismissed, compared to 47 percent of other federal filings.

• A record 3.9 percent of U.S. exchange-listed companies were subject to “traditional” class action filings in 2016. • The number of filings against foreign issuers increased from 2015 levels despite very few filings against Chinese

issuers, previously the most frequently targeted foreign firms.• Filings against companies in the financial sector doubled to 34 in 2016 after dropping to 17 in 2015.

U.S. Securities Class Action Settlements

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Financial Recovery Technologies (FRT) is a leading technology-based services firm that helps institutional

investors identify eligibility, file claims and collect funds made available in securities class action settlements

and litigations impacting global investors. Offering the most comprehensive range of services, we provide

best-in-class eligibility analysis, disbursement auditing and client reporting.

We deliver the highest level of accuracy, accountability and transparency available to a wide range of

institutional investors including hedge funds, investment managers, custodians, public and private pension

funds, and wealth managers. Financial Recovery Technologies is a Cross Country Group company (www.

crosscountrygroup.com). For more information, go to www.frtservices.com or email info@frtservices.com.

About FRT Global

FRT Global is designed to meet the growing demand for research and analysis of non-U.S. settlement

and recovery opportunities. FRT’s team of professionals possesses the necessary insight, relationships

and expertise to assist you in successful international claims recovery. The company’s FRT Global suite of

services include analyzing trading history for relevant transactions, coordinating with litigation organizers in

different countries, supporting the processing and submitting of transactions, and researching specific case

and jurisdiction requirements.

About FRT Antitrust

FRT Antitrust is a comprehensive monitoring and claim filing service that addresses litigation and

settlements involving investments covered by U.S. federal antitrust laws and the Commodity Exchange

Act. FRT’s knowledgeable team analyzes losses and assesses damages to help clients maximize recoveries

from antitrust class actions and related settlements. Clients are notified when new cases are identified and

significant case milestones are reached. FRT partners with deep domain experts and works closely with

administrators to facilitate claim submission and the subsequent recovery, verification and remittance of

settlement funds on behalf of clients.

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