Pomerantz LLP is lead counsel in a class action lawsuit against Barclays PLC ("Barclays" or the "Company") and certain of its officers. The litigation concerns defendants’ alleged concealment of information and misleading statements regarding its management of its “LX” dark pool, a private trading platform where the size and price of the orders are not revealed to other participants. The Class consists of investors who purchased Barclays’ American Depository Shares (“ADS”) and lost hundreds of millions of dollars when the truth about Barclays’ management of its dark pools came to light.
On November 6, 2017, the Second Circuit affirmed the district court’s decision granting plaintiffs’ motion for class certification. This decision is a significant win for plaintiffs as it conclusively holds that “direct evidence of price impact … is not always necessary to establish market efficiency and invoke the Basic presumption.”
The Second Circuit also put an end to effort by defendants to minimize their burden of rebuttal, making it abundantly clear that defendants seeking to rebut the presumption that investors rely on prices set on an efficient market must do so by a preponderance of the evidence.
The complaint alleges that throughout the Class Period, defendants made false and/or misleading statements, and failed to disclose material adverse facts regarding the Company's operation of its dark pool. Specifically, defendants failed to disclose that: (i) Barclays engaged in a "systematic pattern of fraud and deceit" by using its dark pool to favor high-frequency traders over its other clients; (ii) the pools were promoted as offering investors protection from predatory traders, while Barclays instead courted HFT firms by charging them lower rates; (iii) Barclays falsely understated the percentage of aggressive HFT activity in its dark pool; (iv) Barclays failed to provide monitoring services it promised to investors which would protect the dark pool from aggressive, predatory HFTs; (v) Barclays routed a disproportionately high percentage of client orders to its own dark pool while falsely representing that it routed client orders in a manner that did not favor Barclays LX; (vi) Barclays secretly gave HFT firms informational and other advantages over other clients trading in the dark pool; (vii) Barclays' practices subjected it to regulatory scrutiny and significant reputational harm; (viii) and as a result of the above, the Company's financial statements were materially false and misleading at all relevant times.
Class certification was granted on February 2, 2016 by U.S. District Judge Shira Sheindlin. Following a thorough analysis of the parties’ briefing, expert reports, and an in-depth evidentiary hearing, Judge Scheindlin concluded that under the Supreme Court’s Basic “fraud-on-the-market” doctrine, reliance by investors on defendants’ affirmative misleading statements could be presumed, because Barclays’ ADSs trade in an efficient market. The district court rejected defendants’ argument that to show market efficiency, plaintiffs must provide event studies showing that the market price of the company’s stock price reacted quickly to the disclosure of new material information about the company. While plaintiffs did in fact proffer an event study, the court held – consistent with a vast body of case law – that no one measure of market efficiency was determinative and that plaintiffs could demonstrate market efficiency through indirect evidence.
The action, filed in United States District Court, Southern District of New York, and docketed under 14-cv-5797, is on behalf of a class consisting of all persons or entities who purchased Barclays securities between August 2, 2011 and June 25, 2014, inclusive, and seeks to recover damages against defendants for alleged violations of the federal securities laws under the Securities Exchange Act of 1934 (the "Exchange Act").
Pomerantz’s Barclays litigation team is led by Jeremy A. Lieberman and Tamar A. Weinrib. Marc I. Gross and Emma Gilmore assisted them on the appeal.