According to a recent study, securities class action filings not related to mergers and acquisitions are reaching record levels due to more unpredictable markets. In addition, the study found an upward trend toward more defendants named in filings.
A report released by Cornerstone Research and the Stanford Law School Securities Class Action Clearinghouse found filings not related to mergers reached 126 in the first half of 2019, representing a 17% increase when compared to the previous six months.
The research found “Plaintiffs filed more than 1,000 federal securities class actions in the last five semiannual periods – over 20% of all filings since 1997.”
Law360 attributes the rise to an era of investor protections. Sasha Aganin of Cornerstone Research told the publication it’s become more likely for investors to sue over things like security breaches, rather than fraud.
But while core filings are on the rise, “in three of the six years between 2010 and 2015, at least 50% of core filings have been dismissed.”
The study also found that class action lawsuits brought to contest mergers and acquisitions have decreased by 21% in the first half of 2019. Aganin told Law360 dismissal rates for these suits are high and could make investors less likely to file.
In addition, the recent rate of lawsuits disputing IPOs shifting from federal to state court continues following the U.S. Supreme Court’s Cyan decision. The opinion rules the Securities Litigation Uniform Standards Act did not deny state courts jurisdiction over class actions brought under Section 11 of the act.
Download the in-depth Cornerstone Research Securities Class Action Filings 2019 Midyear Assessment.