In the U.S., the last quarter was affected by two pivotal events: the impending presidential election and the political uncertainty inherent in the run-up, and a looming "fiscal cliff" of automatic tax hikes and government spending cuts. PwC also noted Superstorm Sandy may have played a role by interrupting transportation, shutting down power, and blocking access to the Internet and phone service in the Northeast, thereby disrupting law firms, courts, and financial markets.
"While 2012 started much the same as 2011, it ended very differently," said
According to PwC, the overall number of settlements and total value of settlements decreased in 2012. After a 26 percent decline in the number of settled federal securities class action cases from 2010 to 2011, cases settled in 2012 decreased by seven percent and the total value of settlements in 2012 represented the lowest amount since 2002.
With the exception of 2011, which saw an increase in total settlement value to
Filings related to the financial crisis,
However, while only 36 M&A-related cases were filed in 2012 (as compared to 48 in 2011 and 41 in 2010), those 36 cases represented 21 percent of the total cases filed for the year, making 2012 the third year in a row in which M&A-related cases accounted for more than 20 percent of total cases filed.
"The overall level of M&A deal activity continues to remain below the levels seen prior to the financial crisis," said
PwC also notes that cases against foreign issuers (FIs) decreased dramatically in 2012 compared to 2011, with only 32 cases filed in 2012 (19 percent of total cases), versus 61 filings (32 percent of total cases) the previous year. Cases against
"With future of litigation trends still murky, companies must cast a wide net for monitoring, assessing, and mitigating risks," added PwC's Etzold.
Other notable findings in the 2012 study include:
- Accounting cases diminish, most significantly against foreign issuers – The number of cases that alleged accounting fraud decreased from 74 in 2011 to 51 in 2012, a 31 percent decline. According to PwC, the decline reflects a dwindling number of cases against FIs.
- Health industry sees more cases – The health industry topped the charts as the industry with the highest number of filings for 2012 (38 filings), accounting for approximately 22 percent of total cases filed. The average proportion of filing activity against health industry during the past five years has been approximately 17 percent of total filings.
- Second and Ninth Circuits continue to dominate, but to a lesser extent – The Second and Ninth Circuits saw the most filings among the circuits, with 48 and 32 cases, respectively. However, the 80 combined cases accounted for a relatively low 47 percent of all cases, the first time in the past five years there were more cases filed outside of the Second and Ninth Circuits than within.
"2012 was a year that implied no clear direction as to where regulators or shareholders may focus in the future – at a crossroads, waiting for a sign," concluded Etzold. "2013 looks to be a year that could go in many different directions. Future securities litigation may not be foretold by the trends reflected in the cases filed, but rather in considering the possible direction of the new regime of regulators, and the future paths companies may take."
PwC tracks federal cases filed which allege violations of the Securities Act of 1933 and Securities Exchange Act of 1934. The focus of this study is on cases filed after the passage of the Private Securities Litigation Reform Act. The study also analyzes a variety of issues, including whether the case is accounting-related, a breakdown of accounting issues, and settlement data. Sources include case dockets, news articles, press releases, claims administrators, and
To download a copy of PwC's Securities Litigation study and view our latest video series, visit: www.pwc.com/us/securitieslitigation.
About PwC's Forensic Services
PwC's Forensic Services team of experienced professionals is dedicated to meeting the challenges caused by fraud allegations, financial crimes and other irregularities. Our portfolio of services includes: Financial Crime Examinations, Forensic Technology Solutions, Regulatory Compliance Reviews, Fraud Risk Management and Fraud Prevention, Dispute Analysis and Litigation Support. The Forensic Services team also manages the
About PwC US
PwC US helps organizations and individuals create the value they're looking for. We're a member of the PwC network of firms in 158 countries with more than 180,000 people. We're committed to delivering quality in assurance, tax and advisory services. Tell us what matters to you and find out more by visiting us at www.pwc.com/US.
This content is for general information purposes only, and should not be used as a substitute for consultation with professional advisors.
SOURCE PwC US
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