What is a derivative lawsuit and how does it differ from securities class actions?
A derivative lawsuit is often also filed at or around the time that securities class actions are filed, though the two kinds of suits are different. Derivative lawsuits are brought in the name of and on behalf of a company whose stock was afftected by alleged fraud, when a company will not take action that it should. If you bring a derivative suit, you do have to hold the stock during the pendency of the suit, and you have to have held the stock when the fiduciary duties were breached. In a derivative suit, it does not matter what price you paid for the stock or whether you have a loss on it. The recovery in a derivative lawsuit often is in the form of corporate governance changes, and the derivative lawsuit does not result in a distribution of a settlement fund to shareholders. Any financial recovery obtained typically would belong to the corporation in whose name the suit was brought.
