Earlier this year, Cornerstone Research released 2012 review of Securities Class Action Filings in conjunction with the Stanford Law School -- see the press release. The report notes that the number of federal securities class action filings have decreased in recent years and, in particular, has fallen nearly 20% from 2011 to 2012. For the number of filings over the past sixteen years can be found below (Figure 2 in their report).
Cornerstone attributes the majority of the decline in class action filings to the dramatic decrease in filings concerning mergers & acquisitions (M&As) as well as Chinese reverse mergers (CRMs). The second circuit (NY, etc.) became the most active single venue for securities class actions in 2012 -- 30% of total filings -- after several years with the ninth circuit (Western US, etc.) contending for that title -- 18% of total filings in 2012.
A similar report was almost concurrently released by NERA Economic Consulting. NERA found 207 federal securities class action filings 2012 and a more modest 8% decrease from the year prior. For a comparison between these two studies and an explanation of this discrepancy, see the fantastic post by Lyle Roberts over at 10b-5daily.
So what issues might be the source of litigation in the future? Cornerstone analyzed the 3,001 reports submitted to the SEC under the Dodd-Frank whistleblower program from October 2011 through September 2012. The breakdown by issue shows a broad distribution of potential infractions:
In general the Cornerstone report suggests that the landscape of securities class actions is changing. It will be interesting to see if recent regulatory changes, such as full implementation of Dodd-Frank and JOBS Act provisions, will result in a shift in the types of issues that lead to class litigation, or if market changes such as the rise of ETFs or the re-emergence of structured finance will lead to new types of disputes.
