Cornerstone Research and the Stanford Law School Securities Class Action Clearinghouse have released a report on federal securities class action filings in 2005. The findings include:
(1) The overall number of securities class actions filed in 2005 decreased more than 17%, falling from 213 filings to 176 filings. This year’s filing rate is nearly 10% below the post-PSLRA historic average. Moreover, the alleged investor losses associated with the cases decreased significantly.
(2) Filing activity declined in the technology and communications sectors (down 32% from 2004). The consumer non-cyclical sector (e.g., biotechnology, commercial services, cosmetics, food, healthcare products) gave rise to the most securities class action litigation.
(3) There was a substantial increase in the number of securities class actions alleging misrepresentations in financial reporting (from 78% in 2004 to 89% in 2005) and false forward-looking statements (from 67% in 2004 to 82% in 2005).
The authors of the report suggest that the decrease in overall filings may be the result of the large majority of suits related to the boom-and-bust cycle of the late 1990s-early 2000s having already been filed, improvements in corporate governance, and less stock market volatility.