Class actions around the world continue to gather momentum, and, over recent years, there has been a marked rise in group securities litigation globally. But what is "group securities litigation"?

Stocks, Shares and Securities – What are they?

For those who aren’t aware, stocks and shares are units of ownership in a company. Companies sell them to shareholders to provide funding to grow their business. Some companies may have millions of shareholders, who all own a tiny piece of the company. Individuals 'buy and sell' shares on stock markets like the London Stock Exchange (LSE).

Stocks and shares can also be described as 'securities'; a catch-all term to describe types of investments you can buy or sell.

Disgruntled shareholders?

Shareholders can bring claims against listed companies to recover losses suffered when buying, selling or holding securities in reliance upon information containing an untrue or misleading statement, or where there is an omission of, or delay in publishing, information that requires to be published.

In the UK (including Scotland), Sections 90 and 90A of the Financial Services and Markets Act (FSMA) 2000 are the primary mechanisms available to shareholders to bring claims against issuers for untrue or misleading statements or omissions.

The group action brought against a major UK bank and its former directors by tens of thousands of investors in 2008 is widely seen as the pioneering event in the development of English group 'securities' actions.

But what could this mean for companies in Scotland?

A Scottish HQ?

A company registered in Scotland could be vulnerable to a group securities litigation being raised against them in the Court of Session, Edinburgh. As a reminder, group proceedings procedure in Scotland allows groups of two or more people with the same, similar, or related claims, to unite to raise proceedings as a single action in the Court of Session.

However, a company may not be 'headed-up' or originate from Scotland, but if they have a Scottish office then this may open the door for them to become the subject of a group securities litigation in Scotland. Any company publicly traded could be vulnerable. If there is discontent building against a listed company in Europe for example, and that company has a Scottish office, then it may be possible for disgruntled shareholders residing in Scotland to consider raising their own action against the company in the Scottish Courts. Although, there could be a challenge to the Scottish Court's jurisdiction to hear such an action, and the group may be open to criticism if the untrue or misleading statements originated from the company's registered office, not located in Scotland.

What is there to lose?

The types of claims being brought against financial institutions and companies are high-value, and will be driven by corporate investors and funds with deep pockets.

With the continued growth in third-party litigation funding and after-the-event (ATE) insurance, the risks of adverse costs being awarded against shareholder claimants is being removed or materially reduced, and this may make group securities litigation attractive to those of more limited means, too.

Time will tell…

Although momentum in group securities litigations grows around the world, they haven’t quite found their way to Scotland yet. We shall continue to monitor developments.


Lucy Duff

Senior Solicitor

Craig Watt

Partner & Solicitor Advocate

Stephen Goldie

Managing Partner