The Evolution of FSMA and Collective Actions [2025 Guide]

Over the past two decades, the landscape of securities litigation in the United Kingdom has undergone a radical transformation. Once marginal, complex, and largely uncertain, collective claims for losses suffered by investors in publicly traded companies especially under statutory provisions have matured into a substantial, credible, and increasingly influential feature of the UK corporate and capital markets.

A convergence of factors has driven this evolution: statutory reform under the Financial Services and Markets Act 2000 (FSMA); the emergence of important judicial precedents; the growth of third-party and portfolio funding; enhanced institutional investor engagement; and changing expectations around corporate governance and accountability.

This guide explores the current state of UK securities litigation as of December 2025, detailing the key cases and legal shifts that have shaped this dynamic area of law.

Historical Background and Structural Constraints

In the years following the enactment of FSMA in 2000, securities litigation in the UK remained limited and cautious. The legal framework for investor redress had existed on paper—through FSMA and directors’ duties or common law misrepresentation—but practical, procedural, and financial obstacles inhibited large-scale collective actions.

Several key constraints held the market back:

• Lack of opt-out class action regime: Unlike the United States, where securities class action lawsuits have long allowed broad collective shareholder claims, English (and UK) law lacked a comparable structure. Claims had to be brought by named claimants, which limited the scale.
• Uncertain reliance, causation, and loss measurement: Particularly under FSMA, early uncertainty about what constituted reliance on published information, how losses should be calculated, and how to model damages deterred potential claimants.
• High cost and risk: Without widespread third-party or collective funding, individuals or small funds faced substantial upfront costs and the risk of adverse costs orders.
• Evolving market structures: The shift from certificated to dematerialized securities (e.g., via CREST) raised questions about whether FSMA could accommodate modern custodial chains.

These factors combined to keep securities litigation relatively rare, mostly limited to high-profile, exceptional cases of misconduct.

The FSMA Regime: Sections 90 and 90A

Statutory Provisions

The principal statutory base for modern UK securities litigation is found in FSMA, in particular:

• Section 90: Liability for misstatements or omissions in prospectuses or listing particulars when securities are issued or offered.
• Section 90A (together with Schedule 10A): Liability for misleading statements, dishonest omissions, or “dishonest delay” in a broad range of published information, including annual reports and market announcements.

Under section 90A, a claimant must generally show that the company published untrue or misleading information (or dishonestly omitted material information), that the claimant acquired, held, or disposed of shares in reliance on that information, and suffered loss as a result.

Early Uptake and Regulatory Purpose

Although FSMA was enacted in 2000, uptake remained modest for many years. The regime was designed to supplement not replace traditional common law and regulatory mechanisms. However, the statutory structure provided a legal foundation that, in theory, could support large-scale claims if other conditions (procedural efficiency and funding) were met.

Landmark Cases: From Prospectus Litigation to Ongoing Disclosure

The transformation of UK securities litigation can be traced to a series of landmark cases that tested and clarified the potential of FSMA.

The Royal Bank of Scotland Rights Issue Litigation

One of the earliest large-scale group actions under section 90 was the RBS Rights Issue Litigation. Shareholders argued that the prospectus for RBS’s £12 billion rights issue in 2008 had misrepresented the bank’s financial position. Although the case settled in 2017 shortly before trial, it served as a blueprint for how multiple investors could aggregate individual claims into a cohesive group action.

The Tesco plc Litigation: First Major s.90A Group Action

In 2014, Tesco announced a massive profit overstatement, triggering a steep fall in its share price. Institutional investors commenced proceedings under section 90A. A critical legal victory occurred in 2019 when the High Court rejected a strike-out application, confirming that “dematerialized” shareholders (those holding shares via digital custodial chains) had an interest in securities. This decision removed a major structural barrier, significantly broadening the potential pool of claimants.

The Autonomy Corporation Ltd v Lynch & Others Litigation

The most significant recent development is the Autonomy litigation. Following Hewlett-Packard’s (HP) acquisition of Autonomy, HP alleged systemic accounting fraud. In May 2022, the High Court delivered a liability judgment under section 90A.

On 22 July 2025, the court handed down the first-ever quantum judgment under FSMA, ordering damages of approximately £646 million in HP’s favour. This decision provided the first clear framework for assessing loss under section 90A claims, including valuation methodology and counterfactual pricing, removing a key area of uncertainty for future litigants.

Key Legal Developments: Reliance, Omission & Dishonest Delay

Reliance: The Challenge of “Passive” Investors

One of the most ambitious hopes of FSMA litigants was that mass claims, including “passive” investors (such as index funds), could be viable. However, in the 2024 decision in Allianz Funds Multi-Strategy Trust v Barclays PLC, the High Court struck out claims brought on behalf of passive institutional investors.

The court emphasized that under Schedule 10A FSMA, reliance requires that the claimant actually read or consider the relevant published information—market or price-based reliance alone would not suffice. Furthermore, regarding “dishonest delay,” the court held that liability only arises when the omitted information is eventually published.

Post-Barclays Developments

Despite the Barclays decision, further litigation suggests that courts may not entirely foreclose claims by passive investors. In Persons Identified in Schedule 1 v Standard Chartered PLC [2025], the High Court declined to strike out price/market reliance claims at the pleadings stage. This suggests that while the evidential bar has increased, the door is not entirely closed for well-prepared claimants.

Litigation Funding and the New Economics of Claims

A singular development enabling the surge in securities litigation has been the expansion of Third-Party Litigation Funding (TPLF), combined with After the Event (ATE) insurance.

Funding models have evolved significantly:

• Portfolio funding arrangements: Funders aggregate capital across multiple cases, distributing risk.
• Institutional investor participation: Pension funds now frequently sign on to claims, attracted by fiduciary governance considerations.
• Risk shifting: With TPLF and ATE insurance, claimants are less deterred by adverse cost orders or upfront costs.

This professionalization mirrors the funding ecosystems established in other jurisdictions, making the UK a viable venue for such litigation.

Implications for Corporate Governance and Market Integrity

The rising prominence of securities litigation is increasingly viewed as a tool for corporate governance. Given that regulatory bodies are often constrained by resources, civil litigation serves as an alternative mechanism for redress and deterrence.

For public companies and directors, this brings heightened exposure to liability and reputational risk. It incentivizes robust internal controls, transparent accounting, and timely public reporting to avoid triggering claims. This is particularly relevant when considering how long financial sanctions are kept on record and the reputational damage associated with non-compliance.

Challenges and Future Trends

Despite the progress, significant challenges remain. The Barclays decision highlights the high evidential burden for passive investors. Furthermore, because many cases settle, there remains an incomplete body of case law on defences and causation.

Looking ahead to the next 5–10 years, we expect to see:

• Increased institutional participation: Global asset managers will increasingly factor litigation into fiduciary strategies.
• Refinement of legal doctrine: Courts will further clarify liability thresholds for reliance and omission.
• Regulatory interplay: Securities litigation may become a mainstream complement to regulatory enforcement.
• Potential reforms: Pressure may mount for procedural reforms to better accommodate collective redress mechanisms.

Conclusion

The evolution of UK securities litigation reflects a dynamic interplay of statutory law, judicial innovation, and market forces. From the landmark RBS case to the Autonomy quantum judgment, the UK has demonstrated its capacity to support high-stakes securities claims.

While challenges regarding reliance remain, the refusal to strike out the Standard Chartered claim suggests that the door to mass actions remains open. For institutional investors, practitioners, and policymakers, UK securities litigation has evolved from legal marginality to a central component of capital markets accountability.

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