A Chinese insurance company recently came to a class action settlement agreement with shareholders, and if approved, the proposal will have a sizable payout.
CNinsure, Inc., announced that the securities class action lawsuit was filed in the U.S. District Court for the Southern District of New York. The initial lawsuit was filed on Oct. 17, 2011, though a number of the company's officers had the allegations against them dismissed on June 24, 2013.
The settlement, if approved beyond the preliminary agreement, would affect all shareholders who purchased interests in the company during the class period between March 2, 2010, and Nov. 21, 2011. CNinsure will pay stockholders approximately $6.62 million in order to settle the lawsuit. This will be paid out through a company insurance plan, as well as the director and officer liability.
"We believe the settlement is in the best interest of the Company and our shareholders as it avoids unnecessary expenses and distractions from a time-consuming litigation process," said Chunlin Wang, CEO at CNinsure. "We are pleased to put this matter behind us so that we can focus on the development of our business going forward."
If the proposal is approved as a settlement, CNinsure will have all questions of fault or liability expunged. The company also made clear that the agreement does not admit that they committed any wrongdoing, but this helps get rid of any further uncertainties about the lawsuit.
Lawsuit filing details
The lawsuit was initially filed by law firm Federman and Sherwood back in 2011 in the aforementioned court. The allegations against CNinsure revolved around violations of the Securities Exchange Act, specifically Sections 10(b), 20(a) and Rule 10b-5. This was due to the company releasing a number of statements that may have been false or misleading.
When these were announced, the company's stock price rose notably, though these gains were argued to be artificial increases.
Second lawsuit filed
Another law firm noted that it also filed a suit against CNinsure. Levi and Korsinsky explained that its lawsuit had a class period from March 2, 2010, and Sept. 14, 2011. Some of the issues involved were noted to be the company's overstatement of its earnings by releasing lower numbers about costs related to the scorecard system it owned. Additionally, incentives for company members were not factored into the figures.