Canadian Underwriter

Credit crisis no longer chief source of securities litigation: Advisen Ltd.

October 15, 2009   by Canadian Underwriter

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The credit crisis is no longer the chief source of securities litigation in the United States, a recent report from Advisen says.
“The third quarter [of 2009] saw a robust 169 new securities lawsuits filed, but the credit crisis is no longer leading the litigation charge,” says Advisen’s quarterly update on securities litigation, Securities Suits Come Back Strong in Q3 2009.
Even though the pace of suits filed in 2009 Q3 was up compared to the second quarter, the number of new suits related to the credit crisis was sharply lower.
“An increase in both securities class action and securities fraud suits drove up the third quarter total,” said John Molka III, the report’s author. “It’s shaping up as a very active year for securities litigation, but the action is moving away from credit crisis suits. Only nine suits [related to the credit crisis] were filed in the third quarter, compared to 24 in the second and 46 in the first.”
The 169 suits filed in the third quarter represent an 11% increase over the second quarter’s total, but still significantly trail the 249 suits filed in what Advisen calls the “hyperactive” first quarter.
Securities fraud suits brought by regulators and law enforcement agencies were the most common type of suit filed during the quarter, followed by securities class action suits, Advisen says. Together, securities fraud suits and securities class actions accounted for nearly three-quarters of the suits filed in the quarter.
Shareholder derivative suits and suits filed in state courts alleging breach of fiduciary duties and common law torts made up much of the remainder.
“The third quarter saw a continuation of trends that have been developing over the past several quarters,” said Dave Bradford, Advisen’s executive vice president. “In particular, securities fraud suits have replaced securities class actions as the most frequently filed type of suit. They probably will grow to an even larger percentage of the total as the Securities and Exchange Commission steps up enforcement activities under the Obama administration.”

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