The number of actions settled by the SEC in the last
fiscal year remained essentially constant, according to a report prepared by
NERA Economic Consulting. In contrast, the number of securities class actions
filed last year ticked up slightly in the U.S. compared to the prior year
(here). Securities litigation in other countries such as Canada, the U.K. and
Australia, however, generally increased, according to other NERA reports.
The filing of securities class actions in Canada
increased significantly in 2011, continuing a recent trend. In 2011 fifteen new
cases were filed, compared to ten in 2010 and nine in 2009. Indeed, the number
filed in 2011 is almost triple the average number of actions brought from 1997
The largest number of cases filed in 2011 were so-called
Bill 198 actions. Those relate to the adoption of a continuous disclosure
system in late 2005. A number of the new cases involve Chinese issuers. This
trend prompted the Ontario Securities Commission to announce in July 2011 that
it is conducting a targeted review Canadian issuers with significant operations
in emerging markets.
Many Canadian domestic companies also risk being named in
securities class actions in the U.S. the report concludes. Those cases almost
always involve companies with securities listed on U.S. exchanges. In 2011 five
Canadian domiciled companies were named as defendants in six securities class
action filings in the U.S., an increase from the three cases filed each year in
2009 and 2010. Since 1997 Canadian domiciled companies have been named as
defendants in 74 U.S. securities class actions. Of those cases 28% had a
parallel class action filed in Canada. Since Bill 198 was instituted at the end
of 2005 however 46% of the U.S. class actions filed against Canadian domiciled
companies have had a parallel action filed in Canada.
In the U.K. NERA measured regulatory enforcement trends
in terms of fines imposed. For fiscal 2010/2011 the consulting firm found that
fines were at record levels. Standing alone however, that finding does not
fully reflect enforcement activity. Aside from a few large actions where the
fines were imposed at record levels, in fact the total amount of fines imposed
decreased. Furthermore, while the FSA is imposing more fines than previously,
it has focused on unsuitable investments and mis-selling. In contrast, market
abuse cases against firms are rare, the report concludes.
Other key findings include:
Enforcement actions by the Securities and Exchange
Surveillance Commission centered on claimed misstatements reached a record high
of 12 in 2010, up from nine in the prior year, according to NERA. Actions by
the SESC tend to foretell trends in private litigation according to the report.
In private litigation the number of judgments increased
to a record 56 cases in 2010, up from 14 in 2009. Indeed, the 56 civil and
criminal judgment cases in 2010 more than doubled the average of 25 per year
from 1998 through 2009. The number of judgments centered on alleged
misstatements, however, decrease d to seven in 2010 in contrast to fourteen in
the prior year.
In Australia the number of securities class action
filings continued to increase. In 2009 six actions were filed compared to five
in 2008 and three each year in 2006 and 2007. A key to the increase in the
number of cases is the manner of funding. Previously, according to the report,
until recently there was a strong disincentive to bring an action because of
the risk of incurring significant legal costs. The emergence of commercial
litigation funding has altered the incentives for, and ability of, investors to
For more cutting edge commentary on
developing securities issues, visit SEC Actions, a
blog by Thomas Gorman.
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Just have read this blog! Good information about the security litigation in other countries. Want to learn more. So keep blogging!