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Third-Party Filers in Securities Class Action Settlements

Securities class action litigation, like most other class actions, are opt-out lawsuits, which automatically include members of the class unless those members take affirmative action to exclude themselves.

However, some investors do not participate in the settlement because they view the claims process as too complicated or not worthy of their time. One empirical study by Cox and Thomas (2005) revealed that less than one-third of large institutional investors filed claims in securities class actions. Smaller investors are even less likely to get involved in the claims process.

The Role of Third-Party Filers in Securities Class Action Settlements

Over the past two decades, the emergence of third-party filers in securities class action settlements has helped investors collect settlement benefits. A third-party filer, or claims filing service, is a company that seeks out class members and files claims on their behalf. They tend to participate more in securities cases, where claims processes are more complex and the potential recoveries are higher. Once the distribution occurs, third-party filers receive a percentage of their clients’ awards.

Third-party filers can act as a megaphone during class notice, gathering class members and compiling the information necessary to file successful claims. These companies can also minimize the volume of individual class members contacting a settlement administrator with questions, a potential timesaver in the administration process.

While third-party claims filing services can increase class participation and drive valid claims, they may also engage in practices that create additional challenges that attorneys should be aware of to avoid spending unnecessary time and money.

Reduce Risks Associated with Third-Party Securities Class Action Filers

It’s important to understand and avoid the common pitfalls of securities class action filers and identify reputable third-party filers who follow proper protocols.

We have developed and refined some of the best practices when dealing with these entities.

  • Choose competent third-party filers: Some third-party filers cause unnecessary delays and costs by attempting to file past deadline, or filing incomplete “placeholder” claims. Experienced administrators identify these red flags quickly to ensure that the process is running smoothly in the hands of the third-party filers.
  • Maintain clear expectations for remedying errors: Third-party filers who present claims that are incomplete or erroneous at the time of filing should be immediately notified of the steps necessary to correct the issue(s). If the problem persists, third-party filers are again notified during the deficiency and rejection phase of the case. Filers are given a set timeframe to correct these issues, usually 30 days; failure to provide the correct information can, and often does, result in rejection of the claim(s). 
  • Keep tabs on late filings: Although every effort is made to capture claims timely and completely, third-party filers often continue filing claims long after the claim filing deadline has passed. A competent administrator will process all late claim and log the reasons provided by the filers (if any), so that they may be included in the final report.
  • Use technology to avoid duplicative claims: The most problematic practices involve unauthorized claims, where third-party filers sign claims on behalf of class members who have already filed on their own behalf. An administrator employing best practices will have the benefit of the most advanced software to quickly identify duplicate claims, notify the third-party filer, and protect the integrity of the data. 

Claims administrators are a crucial part of securities class actions, as they can keep third-party filers on task with better procedures and processes for electronic claims intake. Oversight in these large cases is critical in preventing mishandling or misprocessing claims. With higher value cases on the line, attorneys and administrators working together can proactively improve the success of their securities class action settlements, while enjoying the added filing power of a third-party partner.

Edward Radetich
Edward J. Radetich, Jr., CPA (Ed), oversees management and operation of the firm. Having participated in the administration of hundreds of class action matters, Ed has been instrumental in developing the policies and practices of the claims administration group over the last 35 years and has established Heffler Claims Group as a leading provider of class action services for antitrust, securities, employment and labor, consumer and government enforcement matters.


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