The U.S. Supreme Court recently issued its long-awaited decision in Goldman Sachs Group, Inc. et al. v. Arkansas Teacher Retirement System et al. on June 21, 2021. The Court held that in ruling on class certification in a securities action, a court may properly consider all relevant evidence, including the generic nature of alleged misrepresentations, even though the same evidence is typically reserved for the merits phase of a securities-fraud class action. The Court further ruled that on a certification motion, defendants bear the burden of persuasion to prove a lack of price impact by a preponderance of the evidence. The Court remanded the case to the Second Circuit Court of Appeals.
The class certification stage will consequently become a critical and hotly contested place for expert debate in securities class actions. We can expect a battle of the experts on the generic nature of alleged misstatements, and also on other areas that can serve as evidence of price impact that may now be considered at class certification.
Vega’s expert was retained on this case in 2015 to perform an in-depth analysis of the customary and usual risk-hedging activities of market-making financial institutions within the larger context of the bank’s investment and securities portfolio to analyze whether Goldman Sacks’ activities, as alleged by plaintiffs, were consistent with hedging and market making activities. To learn more about this engagement, visit us at https://vegaeconomics.com/market-maker-analysis.