4/19/2023 0 Comments Issues and insightsClaims brought under the 1933 Act include claims for violating Section 11 (alleging materially misleading statements in a registration statement), Section 12(a)(2) (alleging materially misleading statements in a prospectus or oral communication), and Section 15 (control-person liability). Although the overall number of filings dropped, lawsuits alleging violations of the Securities Act of 1933 increased 43 percent to their highest level since 2008.M&A activity declined only 15 percent in that period. Merger-objection lawsuits, a cottage industry pre-COVID, seem to have run their course, dropping 69 percent from 2021.Still, 83 percent of 2022 core federal filings alleged Rule 10b-5 violations."Core" federal filings refer to non-merger-objection actions. The number of lawsuits alleging Rule 10b-5 violations was the lowest since 2014. Rule 10b-5 lawsuits are suits brought pursuant to Section 10(b) of the Exchange Act of 1934 and SEC Rule 10b-5 for material misstatements made with deceitful intent in connection with the purchase or sale of a security. Merger-objection lawsuits challenge the adequacy of disclosure in the merger-solicitation (proxy) materials the plaintiffs generally seek better deal terms. The drop is mainly attributable to 61 percent fewer merger-objection lawsuits and 8 percent fewer Rule 10b-5 lawsuits compared to 2021. The number of securities-class-action complaints filed in 2022 declined for the fourth consecutive year. The information highlighted here provides some perspective and benchmarks in terms of industries targeted, litigation length, potential offramps (mainly moving to dismiss or settling), and settlement costs. In this post, we summarize the data and trends revealed in those reports. Those and other insights emerge from annual surveys published by NERA Economic Consulting and Cornerstone Research, two economic-consulting firms. But these time-consuming, costly litigations still target 5 percent of all S&P 500 companies in an average year, and settlement costs rose in 2022. The number of securities class actions filed last year fell for the fourth year in a row.
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