State of Wisconsin Investment Board

Securities Litigation

The following is intended to provide a general description of the procedures used by the State of Wisconsin Investment Board (SWIB) in evaluating and managing securities class action claims as an asset of the trust funds.


While SWIB acknowledges that it may have a fiduciary duty to pursue legal action to recover on a claim, it also takes into consideration that most (if not all) of these claims will be prosecuted by the class action bar whether or not SWIB takes an active role.


General Principles

SWIB acknowledges that is has a fiduciary duty to take reasonable actions to collect on legal claims held as a trust fund asset. A process for identifying, filing and collecting on class action claims shall be maintained by legal staff in accordance with these procedures. The process is intended to identify situations where the expected additional return or benefits from playing an active role in prosecuting a claim rises to the level that merits investment and legal staff jointly conducting a cost-benefit analysis of pursuing a proactive litigation strategy. The process contemplates that input from relevant investment staff will be obtained prior to initiation of any SWIB legal action that impacts portfolio holdings or strategy.

Initial Case Evaluation 

Where it appears that SWIB’s damage claim in a public market corporate fraud case exceeds $20 million, internal legal staff shall perform an initial case evaluation.  This evaluation should include analysis of:

  1. whether the company appears to have engaged in fraud or other serious illegal conduct;

  2. whether SWIB has any investment position that could be disadvantaged by the litigation;

  3. legal vulnerabilities of the case;

  4. potential sources of recovery;

  5. expected discovery demands and distraction of investment staff from their primary function if SWIB became involved in litigation;

  6. whether the case is likely to be effectively prosecuted without SWIB’s active participation;

  7. how much could be added to SWIB’s bottom line by a proactive strategy;

  8. alternative means of obtaining similar results andany other relevant considerations.


Where legal staff concludes that active SWIB involvement in the litigation is expected to produce increased returns or benefits that substantially outweigh the associated costs, including the lost opportunity costs from staff time devoted to litigation, the chief legal counsel shall convene an evaluation meeting with the executive director/chief investment officer (or the executive director/chief investment officer’s designee) and portfolio manager(s). The legal staff’s case evaluation shall be reviewed, with additional factors potentially being identified by the participants for consideration.


Final Recommendation 

If the executive director/chief investment officer (or designee) and the chief legal counsel unanimously concur that the benefits of engaging in a proactive litigation strategy substantially outweigh the associated costs or otherwise merit additional consideration, the chief legal counsel may retain outside case review counsel to further evaluate merits of the case and SWIB’s options for pursuing efforts to realize on its legal claims. Outside counsel’s report shall be presented to and reviewed by the evaluation meeting participants. 

Board Reports and Approvals

The executive director/chief investment officer shall report to the Board on each evaluation meeting outcome, and Trustees must be informed prior to implementation of any approved action. Whenever SWIB’s legal claim exceeds $50 million, Board approval is required to initiate or voluntarily join any litigation, whether it is in the public or private markets. The filing of or active participation of SWIB in appraisal, merger challenge or other non-fraud corporate governance litigation shall require both review through the evaluation meeting process and Board approval.