Securities Class Actions Landscape: Three Trends from H1 2020 for Wealth Managers
Cornerstone Research recently published its Securities Class Action Filings 2020 Midyear Assessment. This blog post distills some of the key findings from that report. All trends information and figures are attributed to Cornerstone Research and the Stanford Law School Securities Class Action Clearinghouse.
Trend #1: Filings are down from last year but remain higher than historical averages
In the first half of 2020, U.S. financial markets experienced extreme volatility in response to the COVID-19 pandemic’s economic ramifications. Against this backdrop of heightened instability, plaintiffs filed 182 new securities class action lawsuits in federal and state courts in the first half of 2020, 117 of which were core filings. While the number of filings is 18% lower than in the second half of 2019, it remains high compared with historical averages; the semiannual average from 1997-2019 is 112 filings. Key themes among the core filings from H1 2020 include COVID-19, cryptocurrency, and cannabis.
For an overview of key settlements and disbursements last quarter, read FRT’s blog Securities Class Action Cases: Quarterly Disbursed Claims – Q2-2020.
Trend #2: COVID-19-related complaints have begun
Securities class action complaints began to cite issues related to COVID-19 in March, and over the course of H1 2020, there were 11 complaints filed involving disclosures regarding companies’ responses to the pandemic. These include allegations related to companies negatively impacted by the virus or looking to address the demand for products as a result of the virus. Other event-driven filings were largely sporadic as this flurry of COVID-19 related filings emerged.
For more insight into the pandemic’s impact on new filings, ongoing prosecutions, settlements, and administrations, download FRT’s proprietary report COVID-19 and its Potential Impact on Shareholder Litigation.
Trend #3: The shareholder litigation market keeps evolving
The only constant is change, and this is especially true in the world of shareholder litigation. From a regional perspective, the first half of 2020 saw an increase in filings against non-US companies. From an industry perspective, the number of technology and communications filings declined, but the financial sector experienced an increase in filing activity.
For more information about the growing complexities of the global securities and non-securities class action landscape, check out the July 2020 edition of FRT Insights Quarterly Newsletter.
FRT Insight: What does this mean for wealth and retail investment firms?
Shareholder litigation remains very active, especially compared with historical trends. While the COVID-19 pandemic and its consequences continue to play out, we can expect a steady pace of filings and settlements to continue—leaving real dollars on the table. In Q2 2020 alone, over $811 million of settlement funds were distributed across 23 settlements. Do you have a solution in place to assist your clients with recovering what is rightfully theirs from these settlement pools? In this time of great uncertainty, implementing a class action recovery solution can help build trust with investors and bring some welcome good news to clients.
FRT AccountWatch is a purpose-built governance program that automates wealth and retail investors’ participation and recovery in securities and antitrust class actions. Through its protection and stewardship of investors’ assets, AccountWatch empowers firms to protect their clients’ best interests and democratizes the recovery process for all investors. To learn more, contact us at firstname.lastname@example.org.
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