Quick Answer: As a shareholder in a securities fraud case, your core federal rights include: the right to sue and recover losses, the right to receive notice of active litigation, the right to participate in any settlement at no upfront cost, the right to object to a settlement before a judge approves it, and the right to full disclosure from the company under federal securities law. These rights apply to every investor — not just large institutions — and are enforceable through civil class action lawsuits. 

In This Article:

• The Right to Sue and Recover Losses 

• The Right to Be Informed: Disclosure Requirements 

• The Right to Receive Notice of Active Litigation 

• The Right to Participate in a Settlement 

• The Right to Object to a Settlement 

• The Right to Recover at No Upfront Cost 

• Frequently Asked Questions 

The Right to Sue and Recover Losses 

Under Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5, any investor who was defrauded has the right to bring a civil lawsuit to recover their losses — regardless of how many shares they owned or their financial resources. 

This right is not limited to large institutional investors. Every shareholder who purchased stock during a period of fraud and suffered losses has legal standing to sue. In practice, these claims are brought collectively through securities class action lawsuits, which allow thousands of investors to pursue recovery together under a single Lead Plaintiff. 

To exercise this right, you generally must demonstrate: 

• A material misstatement or omission by the company 

• The company’s knowledge of falsity or reckless disregard for the truth (scienter) 

• That you purchased shares during the Class Period (when the fraud occurred) 

• That the fraud caused your financial loss 

The Right to Be Informed: Disclosure Requirements 

Public companies are legally required under federal securities law to disclose all material information — anything a reasonable investor would consider important in making a buying or selling decision. 

Required disclosures include: 

• Financial results — quarterly and annual revenue, profit, and earnings per share 

• Business risks — material threats to the company’s business, operations, or financial condition 

• Executive compensation — pay, bonuses, and equity grants for senior officers and directors 

• Major transactions — mergers, acquisitions, divestitures, and significant contracts 

• Material events — anything that could materially affect the company’s value, including regulatory investigations and executive departures 

When companies violate these disclosure requirements, they are infringing on your fundamental right as a shareholder — and potentially committing securities fraud. 

The Right to Receive Notice of Active Litigation

f a securities class action has been filed involving a stock you own or owned, you have a federally protected right to receive notice of that litigation and an opportunity to participate. 

Under the PSLRA, a statutory notice must be published within 20 days of filing. That notice must inform potential class members of: 

• The existence of the lawsuit 

• The Class Period (when the alleged fraud occurred) 

• The claims alleged and the defendant company 

• The 60-day deadline to apply for Lead Plaintiff appointment 

What to do: Don’t wait to receive notice.

Monitor active cases at bgandg.com/cases, or contact a securities attorney directly to find out if a case has been filed involving a stock you hold. 

The Right to Participate in a Settlement  

Every class member has the right to participate in any settlement distribution, regardless of whether they hired an attorney, contacted the law firm, or took any action during the litigation. 

To exercise this right, you must: 

• File a valid claim form with the settlement administrator before the stated deadline 

• Provide documentation of your transactions — typically brokerage statements showing purchase dates, share counts, and prices 

• Have purchased shares during the Class Period and suffered a net loss 

Important: You will not be paid automatically. Many investors never receive settlement money because they fail to file a claim before the deadline, even if they are otherwise eligible.

The Right to Object to a Settlement

Before a settlement takes effect, every class member has the right to file a written objection with the court. A federal judge must consider all timely objections before issuing a final approval order. 

You may object if you believe: 

• The settlement amount is inadequate given the class’s total losses 

• The attorney fee request is excessive relative to the work performed and results achieved 

• The plan of allocation treats your category of investor unfairly 

• The Lead Plaintiff did not adequately represent the interests of the class 

Objecting does not remove you from the class — you retain your right to a settlement share whether or not your objection is successful. If you want to exit the class entirely and pursue an individual lawsuit, you must formally opt out instead. Learn more how securities class action settlement works.

The Right to Recover at No Upfront Cost 

Securities class action attorneys work exclusively on a contingency fee basis, meaning every shareholder has equal access to legal representation regardless of their financial resources — no out-of-pocket costs of any kind. 

How the contingency structure works: 

• The law firm advances all litigation costs. Investigation, expert witnesses, court filings, and discovery — all funded by the firm. 

• Fees are paid from the settlement fund, not by you. Court-approved attorney fees (typically up to 33%) are deducted from the recovery before distribution. 

• If there is no recovery, you owe nothing. The firm bears all financial risk of an unsuccessful case. 

Frequently Asked Questions 

What if the company goes bankrupt? 

Recovery is harder but not always impossible. Directors’ and officers’ (D&O) liability insurance is often a primary source of recovery even after bankruptcy, because the policy covers individuals rather than the company itself. Experienced securities litigators know how to pursue these insurance-based claims even when the company’s assets are depleted. 

Do I lose my rights if the statute of limitations expires? 

Yes. The statute of limitations for federal securities fraud is two years from discovery of the fraud (or when it could have been discovered with reasonable diligence) and five years from when the violation occurred — whichever comes first. Once either deadline passes, your right to bring a claim is permanently lost. If you suspect fraud, consult an attorney immediately — do not wait to confirm.

Can I sue even if I still own the shares? 

Yes. Investors with unrealized losses — those who still hold shares that have dropped in value due to the alleged fraud — can have compensable claims even without having sold. You do not need to have sold your position to be eligible. You can also contact BG&G to know if you lost money in a securities fraud case.

What is the difference between a class member and a Lead Plaintiff? 

Every investor who purchased during the Class Period and suffered a loss is automatically a class member and entitled to participate in any settlement recovery. A Lead Plaintiff is the court-appointed representative who actively directs the litigation on behalf of all class members — approving strategy, reviewing settlement terms, and working closely with counsel. If the case settles, you can receive recovery either way, but as Lead Plaintiff, you have meaningful input into the outcome. 

Do I have rights if I bought shares after the fraud was disclosed? 

Generally, no. Securities fraud class actions protect investors who purchased during the Class Period, while the alleged misstatements were being made. Investors who bought shares after the corrective disclosure (when the fraud became public) are typically not class members, because the price they paid already reflected the disclosed information.

Can I opt out of a class action and sue the company individually? 

Yes, but it is rarely advisable for retail investors. Opting out means forfeiting your share of the class settlement in exchange for the right to pursue an individual lawsuit. Individual securities litigation is expensive, time-consuming, and carries significant risk. For most retail investors, the certainty of a settlement share far outweighs the speculative upside of individual litigation.

What happens to my rights if I sell my shares before the case resolves? 

Typically, your eligibility is based on when you purchased — not whether you still hold the shares when the case settles. If you bought during the Class Period and suffered a loss, you retain your right to file a claim even if you have since sold your position. 

Get a Free Case Review from Bronstein, Gewirtz & Grossman, LLC

If you believe you have a securities or consumer claim, our attorneys can help — at no cost to you. 

Call 917-590-0911 or visit bgandg.com to submit your information for a free consultation.

Bronstein, Gewirtz & Grossman, LLC (BG&G) is a nationally recognized plaintiff’s law firm with nearly 30 years of experience representing investors and consumers in securities fraud and class action litigation. Ranked among the top securities class action firms in the country by ISS Securities Class Action Services, BG&G has recovered hundreds of millions of dollars for clients nationwide. The firm handles securities class action cases on a fully contingent basis.
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