Tuesday, January 30, 2007

A Closer Look at the 2006 Securities Fraud Lawsuits

As The D & O Diary has previously noted (here and here), earlier this month the National Economic Research Associates (NERA) and Cornerstone Research (in conjunction with the Stanford Law School Securities Class Action Clearinghouse) released their respective studies of the 2006 securities class action lawsuit filings. The NERA study can be found here and the Cornerstone study can be found here. Although the two studies differ in some of their numerical details, the two studies agree in most of their important conclusions, including the fact that the number of 2006 filings represents the lowest annual total since the passage of the Private Securities Litigation Reform Act of 1995. Each of the studies has some interesting additional observations about the 2006 filings.

In the latest issue of InSights (here), I review the two studies’ observations and also take a closer look at the 2006 lawsuits to try to better understand the data. In particular I analyze the data (by SIC Code, Industry and Sector) to determine who got sued, where and when. In addition, I review NERA’s study’s conclusions about the 2006 securities class action settlements, assesses the possible reasons for the 2006 filings decline, and close with some thoughts about the possible impact of the decline on the pricing of D&O insurance.

Famous Last Words: "I’m confident it will work, the only thing is, we’re just not sure how much dynamite to use."

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