PWC has released its annual Securities Litigation Study. The 2010 report summarizes the major securities litigation trends, which PWC characterizes succinctly as "both literally and figuratively putt[ing] a cap on the sloppy financial landscape of the last decade, with its mega-frauds, corruption, and near financial collapse."
Among PWC's findings, the study reports that, overall:
Federal class action filing activity rose and the plaintiffs' bar shifted from an overwhelming focus on the financial services industry to a medley of issues across a variety of industries . . . The total number of filings for 2010 (174) increased by 12 percent from 2009 (155), despite a continuing decline in the number of financial-crisis-related filings."
. . .
Despite 2010's decline in the number and percentage of financial-crisis-related cases, overall filings reached the second highest level in the last five years. Certain groups of filings with specific common characteristics—such as those filed against educational companies, M&A-related cases filed across all industries, and health industry cases—all impacted this year's filings. Cases filed against foreign private issuers (FIs), in particular Chinese FIs, also contributed to the increase.
The report also found itigation settlement amounts fell in 2010:
Total settlement value in 2010 fell to the lowest level since 2003 and the average value of settlements decreased in 2010 compared to 2009 by 11 percent, from $34.0 million to $30.1 million respectively. The average accounting-related settlement value of $45.9 million was 319 percent greater than the average non-accounting-related settlement value; in 2009 the difference between the two kinds of settlements was 170 percent.t
Looking forward, PWC sees Dodd-Frank as well as other factors external to the financial industry affecting the volume and type of securities suits:
The signing of the Dodd-Frank Act into law on July 21, 2010 - considered to be the most significant piece of financial reform legislation since the 1930s - bestowed new regulatory authority upon the SEC and provided additional enforcement powers such as whistleblower provisions in November 2010.
The anticipated effects of Dodd-Frank, and particularly the whistleblower program, could lead to a reinvigorated volume of reported securities violations and associated class actions. Other exogenous factors, such as the possibility of WikiLeaks targeting specific industries and the advances in global communication and networking access, may have far larger implications.
The full text of PWC's 2010 Securities Litigation Study is available at: http://10b5.pwc.com/PDF/NY-11-0484%20SEC%20LIT%20STUDY_V6BONLINE.PDF