According to a recent independent report, a record number of federal securities-fraud class actions were filed in the first 6 months of 2017. By the end of June, in fact, 226 securities-fraud class actions had been filed in federal court in 2017. And the number of these filings was higher during this period than any similar period since the Private Securities Litigation Reform Act of 1995 (PSLRA) was enacted.
A Record Pace of Class Actions
The report notes that the spike in 2017 is 135% higher than the semiannual average of class-action filings between 1997 and 2016, including both traditional fraud and M&A-related cases. In particular, traditional filings rose by almost 40% in 2017, compared to the second half of 2016, while M&A filings were up by more than 50%. At this breakneck pace, traditional filings could very well double the historical average, while M&A filings will more than double the historical average.
There has also been a significant shift in who is typically named as the lead plaintiff. Between 2002 and 2012, for example, institutional investors were more likely to be appointed as lead plaintiff. That began to change in 2013 when more individuals were named lead plaintiff than institutional investors – a trend that is continuing.
Reasons Why Federal Securities-Fraud Class-Actions are on the Rise
According to some legal analysts, the rise in federal securities-fraud class actions is due, in part, to the migration of merger claims from state to federal court. Today, plaintiff’s attorneys typically seek to avoid what some call an “experienced and skeptical” Delaware judiciary. Moreover, the rise in federal cases coincides with a drop in the number of quality individual cases.
Key Class-Action Trends
The report also notes key trends. First, disclosure dollar loss (DDL) was up by $74 billion during this timeframe – a 23% rise over the historical semiannual average. Further, the median lag time for traditional filings from the end of the class period was 8 days, the shortest lag time since the PSLRA was enacted. Finally, the number of filings against firms listed in the S&P 500 occurred at an annualized pace of 11.2%, the highest rate since 2002.
Federal securities-fraud class actions have risen so far in 2017, but it remains to be seen whether this trend will continue for the rest of this year and into 2018. In the meantime, if you believe you have been the victim of securities fraud, you should consult with an experienced financial-fraud attorney.