The PwC Securities Litigation Study, now in its 15th year, tracks US federal securities class actions filed since the passage of the Private Securities Litigation Reform Act (PSLRA) in 1995.
According to the survey, 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.
Rivaling the financial industry’s top spot, the health industry was the second most commonly sued industry, followed by the technology industry. The utilities industry, specifically oil and gas, experienced the highest percentage increase of filings for any one industry during 2010 due to an increased number of cases related to mergers and acquisitions (M&A) and the Gulf oil spill.
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.
Other key trends include:
A shift in filings from east coast to west coast
Accounting-related cases as a percentage of total cases fell from 37 percent in 2009 to 35 percent in 2010
The majority of 2010 federal filings continued to name directors and officers.
A decrease in filings against Fortune 500 companies
Corruption and bribery will continue to be ongoing priorities for companies around the globe. Organizations will need to continually and proactively ensure that they have proper internal controls and risk management procedures in place to mitigate potential future situations.