More that 130 class-action securities suits were filed in federal court in the first six months of the year, a historic high, according to data from Cornerstone Research and the Stanford Law School Securities Class Action Clearinghouse, the Wall Street Journal reported today. The volume, which doesn’t include suits challenging mergers and acquisitions, is higher than in any equivalent period since the Clearinghouse began tracking data in 1996, following the passage of landmark securities-litigation legislation. Under securities laws, investors can sue to recoup losses after a stock drops by proving a company or its employees fraudulently misstated or withheld information that would have been material to buying or selling shares. Industry watchers say the rise is being driven by enterprising plaintiffs’ firms bringing more, arguably weaker cases under the perceived strategy that companies will settle early to make a case go away. Advisers are alerting clients that in the current era, every company, from small-cap to corporate giants, needs a plan for defending against fraud accusations following investor losses.
