Capital Markets
Class Action Suits in the Capital Market
The “Class Action Suit” is one of the key judicial mechanisms adopted by the Capital Market Authority to protect market participants and facilitate litigation procedures. It enables a group of investors who have been affected by the same regulatory violation (such as price manipulation or misleading disclosure) to join together in a single lawsuit before the Committee for Resolution of Securities Disputes (CRSD).
Definition of a Class Action Suit and Conditions for Its Certification
- Definition: A private action suit filed by a group of plaintiffs against one or more defendants, where the group of plaintiffs’ suit shares the same legal basis, alleged facts, and the subject matter of the requests (Article 1(c)(10) of the Resolution of Securities Disputes Proceedings Regulations).
- Numerical Threshold: The Circuit shall issue a decision certifying the suit as a class action suit when the number of requests sharing the same legal bases and facts reaches a minimum of (10) requests within ninety days from the date of the announcement of acceptance of their registration (Article 57(a) of the Regulations).
- Commonality of Interests and Facts: The Circuit must establish that the common legal issues and facts in the suit exceed those specific to each individual, and that the class action suit is more effective and efficient in compensating the affected parties (Article 55(a) of the Regulations).
Parties to the Class Action Suit
- Lead Plaintiff: The person appointed by the members of the group by agreement to represent them effectively and efficiently before the judicial committees, conduct the proceedings, and appoint a lawyer on their behalf (Articles 1(c)(11) and 61(b) of the Regulations).
- Members of the Group of Plaintiffs: The persons who join the suit and to whom the same conditions and facts apply (Article 1(c)(12) of the Regulations).
- Defendant: The person or entity against whom the statutory violation or financial misleading has been committed (Article 61(a) of the Regulations).
Course and Procedures of the Class Action Suit
- Filing the Application: Submission of an application to the Committee setting out the justification for initiating the suit and its conformity with existing or potential disputes. The Circuit may also initiate the class action suit on its own initiative (Article 54(a) of the Regulations).
- Acceptance and Publication in the Register: Issuance of a decision accepting the application and its publication in the “Class Action Suits Register” to enable the public to access it (Articles 55(c) and 56(b) of the Regulations).
- Suspension of Individual Suits: Suspension of all pending individual suits that correspond to the class action suit, with the aim of joining them to the class action suit (Article 58(a) of the Regulations).
- Appointment of the Lead Plaintiff: The group members agree to appoint a “Lead Plaintiff” to pursue the suit on their behalf (Article 61(b) of the Regulations).
- Issuance of the Decision: Substantive consideration of the suit and issuance of a decision whose effect extends in favor of and against all joined parties (Article 75 of the Regulations).
Settlement and Withdrawal
- Class Settlement: The Lead Plaintiff and the Defendant may submit a “written settlement proposal” to close the suit. The settlement shall not take effect unless approved by the judicial Circuit and no more than 30% of the members object to it, provided that the amount of their claims represents no less than 30% of the total claims (Articles 69 and 70 of the Regulations).
- Right of Withdrawal: Any member of the group may withdraw from the Class Action Suit within (30) days from the date of announcement of the certification decision and continue their suit individually without prejudice to their rights (Article 59 of the Regulations).
- Binding Effect and Class Action Suits Register: The General Secretariat shall establish the “Class Action Suits Register” to announce hearing dates and decisions issued, and the effects of the judgments issued shall apply to all those registered in the Register (Articles 56 and 75 of the Regulations).
Key Information
The Class Action Suit under the Capital Market Law embodies a means of protection that enables investors and affected parties to effectively enforce their rights, ensures consistency in judicial interpretation, and reduces the duration of litigation, thereby safeguarding market stability and enhancing market participants’ confidence.
Legal disclaimer: The information published on the website and social media platforms of Eyad Reda Law Firm LLP ("the Firm") is provided for general informational purposes only and does not constitute legal advice or a legal opinion. Use of this information does not create a lawyer–client relationship. While the Firm strives to ensure the accuracy of the content, it accepts no liability for any loss or damage arising from reliance on it. Users are advised to obtain specialised legal advice by submitting a formal request through the Firm's approved communication channels.