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2016 Securities Lawsuit Filings Surge to Record Levels

By Kevin LaCroix on January 2, 2017 POSTED IN SECURITIES LITIGATION
http://www.dandodiary.com/2017/01/articles/securities-litigation/2016-securities-lawsuit-filings-surge-record-levels/


Largely driven by a surge in the number of federal court merger objection class action lawsuits, the number of securities class action lawsuit filings during 2016 reached record high levels. The number of filings in 2016 accelerated as the year increased, with a significantly greater number of filings in the year’s second half, compared to the number of filings in the year’s first half.

The Number of Federal Lawsuit Filings: There were a total of 271 federal court securities class action lawsuits filed in 2016, which represents a whopping 43% increase over the number of filings in 2015, when there were only 189 federal court securities suit filed. The 2016 filing figures represent the highest annual number of securities class action lawsuit filings since 2001, when the filings levels were distorted by the number of IPO laddering cases that year. If (as is usually the case for purposes of securities class action statistical analysis) the IPO laddering cases are disregarded, the number of securities class action lawsuits filed in 2016 is the highest annual total on record.

The 271 filings in 2016 is well above the long-term historical average annual number of filings. The number of securities suit filings in 2016 is 44% above the 1997-2014 annual average of 188.

Not only was the number of filings in 2016 greater than long-term annual averages, but the filing pace significantly accelerated as the year progressed. There were 122 filings in the first six months of 2016, but there were 149 filings in the year’s second half. The 149 filings during the second half of 2016 is the highest semiannual number of filings since at least 2006; the 149 filings is also 58% above the semiannual average number of filings for six month periods of 94 between 1996 and 2015.


The Rate of Litigation: Not only was the absolute number of securities lawsuit filings at record levels in 2016, but the rate of litigation was also at record levels as well, as a reflection of the lower number of companies listed on the U.S. securities exchanges in 2016 compared to earlier periods.

The long-term average annual percentage of all U.S.-listed companies hit with securities suits during the period 1997-2015 was roughly 3.0%. Due to the increased level of litigation activity and the decrease in the number of listed companies, the litigation rate in 2015 was 4.0%, the highest litigation rate since the passage of the Private Securities Litigation Reform Act in 1995. However, at 2016’s half-way mark, Cornerstone Research projected, based on the filing rate during the year’s first half, that the year-end litigation rate would approach 5.0%. Using Cornerstone Research’s mid-year estimate for the number of public companies, the 2016 litigation rate could have been as high as 5.9%, which would represent an unprecedented rate of litigation, well above even last year’s record litigation rate.
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http://www.dandodiary.com/2017/01/articles/securities-litigation/2016-securities-lawsuit-filings-surge-record-levels/