In 2004, securities fraud class action settlements produced $5.45 billion in cash to be distributed to defrauded investors. Institutional investors own the lion's share of the publicly traded equity securities in this country and therefore were entitled to collect most of that money by simply filing relatively simple claims forms documenting their trading during the class period. Those institutions that chose to do so recouped large sums of money for their beneficiaries.

However, in a pilot study we published two years ago, we reported that nearly two-thirds of the institutional investors with financial losses in fifty-three settled securities class actions failed to submit claims. As a consequence of this failure, substantial sums that they were entitled to receive were given to others. Using some back-of-the-envelope calculations, one commentator analyzing our results suggested that each year slightly more than $1 billion is left on the settlement table by nonfiling financial institutions. Because we had a small sample of settlements in our study, we could only reach tentative conclusions about the extent of the problem. The pilot study nonetheless portended several disturbing policy implications for securities class actions.