$2 trillion pension fund group calls on SEC to re-establish class action rights in the US

Almost 100 of the world’s biggest pension funds collectively running more than $2 trillion in assets have written to the US Securities & Exchange Commission (SEC) petitioning it to restore their ability to sue non-US corporations for fraud when they have bought the company’s shares on a foreign exchange.
Some of the funds say the impact of last year’s landmark Morrison v. National Australia Bank ruling by the US Supreme Court, which prevents them from doing so, could lead to them reviewing whether to invest in companies with significant exposure to the US. Investors are also concerned about the impact of the Morrison ruling on legal action in the US against oil giant, BP. In December 2010, a Houston judge named pension funds from the states of New York and Ohio as lead plaintiffs in litigation against the oil company over the Gulf of Mexico oil disaster. BP has a secondary listing on the New York Stock Exchange. Current and former directors of BP also face further lawsuits in the US. However, it is believed non-US BP shareholders could be unable to join any legal action despite the explosion and spill occurring in the US because they bought their shares on the London Stock Exchange where BP has its primary listing.Speaking at a conference in Amsterdam earlier this month, titled the Rights and Responsibilities of Institutional Investors co-hosted by Institutional Investor and US law firm, Barroway Topaz Kessler Meltzer & Check, Femke van’t Groenewout, senior advisor, responsible investment, at PGGM, the €100bn Dutch pension fund manager giant, said the Morrison ruling could limit shareholders to invest in markets where they can expect legal recovery in the event of fraud or corporate abuse: “It will certainly make us look at the risks attached. We want to see better protection for institutional investors going forward.”
Luke Bierman, former General Counsel for the $130bn New York State pension fund said the SEC had been charged by the US Congress to issue a report next year on Morrison, but that so far US lawyers had not yet been able to make much headway against the ruling.
The investor letter has been co-ordinated by three US law firms: Barroway Topaz Kessler Meltzer & Check, Bernstein Litowitz Berger and Grossmann, and Grant & Eisenhofer.