What Happened in 2022 and How Will 2023 Shape Up?
Settlements in 2022
According to a report by ISS Securities Class Action Services, 2022 saw 141 securities class actions end in settlements, resulting in $4.77 billion in payouts for shareholders – the highest recovery in the past four years and a 36% increase from 2021.
Of the 141 settlements in 2022, ISS SCAS found that 22 included allegations of inappropriate stock sales by company insiders, 18 involved cases that alleged violations of Generally Accepted Accounting Principles, and seven were tied to restated financials.
“Looking ahead, it appears likely that 2023 will continue to deliver meaningful shareholder recoveries,” the report said. “A few 2023 high profile settlements have already been announced and await formal court approval in the coming months[,]” including Dell Technologies valued at $1 billion.
A report released by Broadridge Financial Solutions, Inc. notes that globally, securities settlement value increased by 142% to reach $7.4 billion, providing 21% more claim filing opportunities. The average settlement was in excess of $45 million. “By most metrics, securities settlement activity in 2022 drove one of the busiest years we’ve ever seen, led by more than ten mega-settlements exceeding $100 million, including the second largest securities settlement outside North America,” said Steve Cirami, Broadridge Global Class Actions leader. Broadbridge also identified more than 240 newly filed class actions worldwide related to investments in publicly traded securities, bringing the total number of active cases the company is tracking but that have not settled in excess of 900.
Filings in 2022
According to Cornerstone Research’s report, “Securities Class Action Filings — 2022 Year in Review,” in 2022, plaintiffs filed 208 securities class-action lawsuits in federal and state courts, down from 218 cases in 2021 and a significant decrease from 332 cases in 2020 and 427 cases in 2019. The report explains the decline is mostly due to a continued decline in federal mergers and acquisitions filings, which reached the lowest number seen since tracking began in 2009.
Core filings increased by one, with filings related to COVID-19 reaching a record high of 20 filings and cryptocurrency-related filings experiencing a twofold increase from 2021, with 23 filings in 2022. Additionally, there was a steep increase in the cumulative dollar amount attributed to filings.
The SEC in the Game
It should also be noted that the SEC brought 760 actions in fiscal year 2022, an increase of 9% from the prior year. Money ordered in SEC actions, comprising civil penalties, disgorgement, and pre-judgment interest, totaled $6.439 billion, the most on record in SEC history and up from $3.852 billion in fiscal year 2021. Civil penalties totaled $4.194 billion and were also the highest on record. Fiscal year 2022 was the SEC’s second highest year ever in whistleblower awards, in terms of both the number of individuals awarded and the total dollar amounts awarded.
“As reflected in these results, the Enforcement Division is working with a sense of urgency to protect investors, hold wrongdoers accountable and deter future misconduct in our financial markets,” said Gurbir S. Grewal, Director of the Division of Enforcement. “A centerpiece of those efforts is ensuring that we are using every tool in our toolkit, including penalties that have a deterrent effect and are viewed as more than the cost of doing business.”
Look Ahead at 2023
There have already been five cryptocurrency cases filed this year, solidifying crypto’s continued trend. Following closely are SPAC and COVID-19 related cases, with three filings each.
An article by ALM/Law.com notes that some attorneys are pointing to a commercial real estate bubble burst. With COVID-19 came a decline in the need for office space, and we are still feeling those effects. Defaults and litigation could follow. For public companies that own commercial real estate, this could mean securities litigation.
Tech has also been recently targeted by securities lawsuits, especially in relation to how these companies have dealt with data privacy and customer data, which is always at the forefront of consumers’ concern.
Finally, some attorneys anticipate litigation expanding from “event-driven litigation”—such as related to major oil spills or other environmental disasters—to firms taking a closer look at ESG disclosures and “greenwashing” allegations in relation to shareholder interests.
Only time will tell what trends will take off. Regardless of the basis for these cases, you can be sure that we will continue to fight for the rights of shareholders.