Compare and Contrast

NERA Economic Consulting and Cornerstone Research (in conjunction with the Stanford Securities Class Action Clearinghouse) have released their 2012 annual reports on securities class action filings. As usual, the different methodologies employed by the two organizations have led to different numbers.

The findings for 2012 include:

(1) NERA finds that there were 207 filings (compared with 225 filings in 2011), while Cornerstone finds that there were 152 filings (compared with 188 filings in 2011). NERA normally has a higher filings number due to its counting methodology (see footnote 2 of the NERA report). A key difference in 2012 is how Cornerstone and NERA counted M&A suits, with NERA reporting 53 M&A filings and Cornerstone reporting 13 M&A filings.

(2) The difference in the M&A filings count leads NERA and Cornerstone to markedly different conclusions about what happened last year. NERA finds that filings generally are holding steady, with the key difference being a decline in credit crisis filings (from 13 filings to 4 filings). In contrast, Cornerstone concludes that there has been a sharp decline in filing activity, led by the drop in M&A filings (from 43 filings to 13 filings), and that this decline has resulted in the second-lowest filing level in the past sixteen years.

(3) NERA and Cornerstone agree that filings in the Ninth Circuit were down nearly 50% as compared to 2011. Cornerstone attributes the change “largely” to a decline in M&A and Chinese reverse merger filings.

(4) NERA finds a sharp drop in the number of settlements. Only 93 securities class actions were settled in 2012 — a record low since 1996 and a 25% reduction as compared to 2011. Settlement values, however, were near their average level from recent years.

The NERA report can be found here. The Cornerstone/Stanford report can be found here.

Quote of note (Professor Grundfest): “Is there a shoe waiting to drop? The SEC claims that the Dodd-Frank bounty program has helped it build a large inventory of high-quality leads as to fraud at publicly traded corporations. But will the Commission be able to transform these leads into quality enforcement actions? And, will private-party plaintiffs be successful in prosecuting “piggyback” claims that copy the Commission’s complaints? The current quiet patch in private securities fraud litigation could certainly be unsettled if the Dodd-Frank bounty program generates a new wave of private claims.”

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