A securities lawsuit that is filed under the US SEC Rule 10b-5 alleges that the
defendants intentionally misreported the firm’s true financial condition during the
class period[2]. The lawsuit is filed on behalf of all persons and entities that purchased
the securities of the firm during the class period. Defendants in the securities lawsuit
are usually the firm, the CEO and other officers and directors. Typically, a securities
lawsuit that is not dismissed is settled prior to or during preparation for trial and the
settlement agreement provides for a monetary penalty that is distributed to all
qualified recipients according to the plan of allocation[3].