Finance Firms Hit With Securities Class Action Wave

Finance Firms Hit With Securities Class Action Wave - 1/6/2009

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Finance Firms Hit With Securities Class Action Wave
Jacqueline Bell

Securities Law 360. January 6, 2009
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EXCERPT: The financial services sector faced a wave of securities class action litigation in 2008, according to a new study, with almost half the cases filed last year targeting financial services firms. A total of 210 federal securities class actions were filed in 2008, a 19 percent increase in filings over 2007, according to an annual report compiled by the Stanford Law School Securities Class Action Clearinghouse in cooperation with Cornerstone Research. Out of the total federal securities class actions filed last year, 103 involved financial services firms. […] “This level of litigation intensity against a single industry is unprecedented since the passage of the 1995 reform act,” said Joseph Grundfest, director of the Stanford Law School Securities Class Action Clearinghouse, referring to the U.S. Private Securities Litigation Reform Act of 1995, which heightened the pleading standards for securities class action litigation. Still, while the overall number of securities class actions filed in 2008 was an increase over the previous year, the second half of 2008 saw fewer filings than the first half, a surprising result given the dramatic increase in stock market volatility in the latter half of the year. Historically, an uptick in market volatility ushers in a crowd of new securities lawsuits. “The data suggests an intriguing possibility that the pool of major financial services defendants might be getting fished out. Many major financial services firms have already been sued, and plaintiffs may be choosing to focus on filing amendments to existing complaints rather than initiating new ones,” Grundfest said. The effects of the mortgage meltdown were first felt in mid-2007. By the second half of 2008, the major financial players had already been sued by potential plaintiffs, Grundfest noted, predicting that securities litigation may actually decline in the coming year as a result.

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