What is a Securities Class Action?

A securities class action is a lawsuit brought on behalf of a group of investors who have suffered an economic loss in a particular stock or security as a result of fraudulent stock manipulation or other violations of federal or state securities law.

Securities class actions are brought by one or more investors in the stock on behalf of all other who have suffered financial losses as a result of purchasing shares in a company during the period of time the fraud or securities laws violations artificially inflated the value of the stock, the class period.

For example, if a group of investors purchase stock in a company as a result of this company’s fraudulent press release that causes the stock to rise, and the falsity of the press release comes to light causing the stock to drop, those investors have suffered economic damages. Of course, the amount of damages suffered by each individual stockholder depends on the number of shares he or she purchased.