The authors provide a summary of key concepts in financial economics that may be important in the context of shareholder actions in the UK.
Sections 90 and 90A of the Financial Services and Markets Act 2000 (FSMA) provide for remedies to shareholders for losses caused by allegedly untrue or misleading statements. While the litigation landscape in the UK is still evolving, FSMA arguably makes it easier to bring collective actions on behalf of a large group of investors.
Financial economists routinely use event studies to analyse the effect on share prices of new, publicly released information.
Experience in securities litigation in the US suggests that various approaches in the field of financial economics may be applied in the UK. However, it is important to recognise the limitations of these approaches to draw reliable inferences and conclusions in shareholder litigation.
Using hypothetical case examples, authors Ronnie Barnes, Kristin Feitzinger, Greg Leonard, and Shaama Pandya provide a summary of key concepts in financial economics that may be important in the context of shareholder actions in the UK:
- Analyzing stock prices and market efficiency
- Addressing damages and causation
- Assessing investors’ reliance on alleged misrepresentations