This year saw a 46% increase in federal securities class action lawsuits, rising to 404 cases in total. Much of this growth can be attributed to so-called merger and acquisition “Disclosure Only” cases. However, the bigger story may be from the increase in filings from anti-corruption issues, cyber breaches, and actions against foreign issuers, as well as the emergence of new allegations in Securities Class Actions related to crypto currencies and workplace harassment.
2017 saw the first four Securities Class Actions arising from data breaches, alleging shareholders were defrauded in connection with cybercrime incidents. With a growth in both regulation and cyber issues, companies face new governance and technology requirements as well as disclosure obligations.
Over the course of the year, the Republican-led congress and new Presidential administration implemented substantial changes to regulation, trade, and the healthcare industry. Those changes, which continue to evolve, may have a material impact on business plans and cause previously issued earnings estimates to change.
These changes are expected to impact organizations in various ways.The constantly shifting environment around crypto currency and Initial Coin Offerings (ICOs) may lead to increased focus, regulatory inquiries and potential enforcement actions for the companies operating in this space. We would also expect other topical current events and societal trends to result in securities litigation.
On December 22, 2017, President Trump signed into law the most comprehensive tax reform in more than 30 years. The tax reform act ("The Act") addresses business, international and individual tax provisions. While The Act has anticipated benefits for most types of businesses, shareholders will be paying close attention to how companies disclose their earnings guidance and the use of tax benefits to fund dividends and acquisitions. The continued impact of the Tax Act is a trend that we will continue to monitor.
Corruption is one of the biggest issues facing society today. How are you addressing via FCPA and anti-bribery and corruption programs?
With a growth in both regulation and cyber issues, how is your company addressing new governance requirements, technology requirements and disclosure obligations?
How are you navigating the risk and regulatory environment around cryptocurrencies and establishing policies to help navigate this emerging phenomenon?
The future of healthcare reform will impact business decisions and earnings estimates, and may drive Securities Class Actions. How are you preparing?
How are you looking into the long-term implications - including financial reporting - of Tax Reform across your organization?
What are the top policy trends expected in 2018, and how will they impact Securities Litigation and your organization?
Patricia A. Etzold
Partner, PwC US
Partner, PwC US