Securities Class Actions Rose 10% in 2013: NERA

January 22, 2014
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More securities class actions were filed in U.S. federal court in 2013 compared to 2012 but the increase was small.

Also, the number of settlements was near a record low.

According to a report by NERA Economic Consulting in New York, in 2013, there were 234 securities class actions filed, compared to 213 class actions filed in 2012, representing a 10 percent increase and a slight increase compared to the 224 average number of filings in the period of 2008 to 2012.

Filings of securities class actions involving alleged violations of Rule 10b-5, Section 11, or Section 12, saw a 15 percent increase over 2012, thereby exceeding the filings in any year in the 2009 to 2012 period.

Filings in the 5th Circuit (Louisiana, Mississippi, Texas) alleging violation of Rule 10b-5 more than doubled in 2013 to 13, compared to six filings in 2012 and five in 2011.

Rule 10b prohibits any act or omission resulting in fraud or deceit in connection with the purchase or sale of a security.

The number of class actions settled in 2013 came close to the record low of 2012. Only 100 securities class actions were settled in 2013, compared to 94 settlements reached in 2012 and the 127 average settlements per year in the period of 1996 to 2011, according to the report, “Recent Trends in Securities Class Action Litigation: 2013 Full-Year Review.”

Average settlement amounts for “usual” securities class actions in 2013 broke prior records, reaching $55 million, an increase of 53 percent over 2012 and a 31 percent increase over the previous high in 2009. (By “usual,” NERA refers to settlements excluding those over $1 billion, merge objection settlements, and IPO laddering settlements). The median settlement amount for 2013 was $9.1 million, a 26 percent decrease compared to 2012, NERA said.

“Large settlements got larger, while small settlements got smaller in 2013,” said report co-author Dr. Renzo Comolli. “Nine securities class action settlements last year passed the $100 million mark, driving the average settlement amount to its record high. In addition, numerous small settlements occurred in 2013, substantially driving down median settlement values.”

 

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