According to Cornerstone Research’s 2020 Midyear Assessment, the number of securities lawsuits filed in federal & state courts dropped by 18% compared to the second half of 2019, and were at their lowest level since 2016. Kevin LaCroix recently blogged the details over on “The D&O Diary.” Here’s an excerpt:
According to the report, there were 182 securities class action lawsuits filed in state and federal court in the first half of 2020, which while below the 221 filed in the second half of 2019 and 207 filed in the first half of 2019, is still well above the semiannual average of 112 filings during the period 1997-2019. The 182 filings in the year’s first half is the lowest semiannual number of securities suit filings since the second half of 2016. The report states its view that a decline in Section 11 filings “was the primary reason for the overall reduction in filing activity in the first half of the year.”
The decline in the number of filings from the second half of 2019 to the first half of 2020 represented a drop in the number of filings of 18%. Core (or traditional) filings declined 13%, from 134 in the second half of 2019 to 117 in the first half of 2020. Due to the slowdown in merger deal activity, merger objection lawsuit filings also declined, from 87 in the second half of 2019 to 65 in the first six months of this year, representing a decline of 25%. The 65 first half merger-related suit filings in the first half of this year is the fewest number in federal courts since the second half of 2016.
In case you’re wondering, Cornerstone says that 11 Covid-19-related securities class actions have been filed through the end of June. Kevin’s also been monitoring those filings, and he pegs the number at 15. Lawsuits that Kevin includes in his list that Cornerstone doesn’t are those filed against Zoom, Colony Capital, Wells Fargo, and iAnthus Capital Holdings.
Kevin’s blog has links to prior posts that explain why he included these cases in his tally, but as far as I’m concerned, he doesn’t have to explain anything – he’s a fellow Clevelander, so I’ve got his back.
Crypto Enforcement: Here Comes The Martin Act!
Those of you who are of my vintage likely remember the commercials for Ron Popeil’s Veg-O-Matic that touted its 1,001 household uses – “It slices! It dices! It makes julienne fries!” Well, New York’s Martin Act just keeps on proving that it’s the Empire State’s answer to the Veg-O-Matic. This DLA Piper memo says that the Appellate Division of New York’s 1st Dept. recently upheld a lower court ruling authorizing the statute’s use as the basis for the New York AG’s long-running investigation of the virtual currency “tether.” This excerpt lays out the key takeaway from the Court’s decision:
The decision is a timely reminder to companies and individuals in the FinTech sector that the New York AG has broad power to investigate suspected fraud in the realm of virtual currencies. Dealing with the New York AG’s Investor Protection Bureau may be a disorienting experience for white collar practitioners used to responding to inquiries by federal regulators.
The text of the Martin Act places few clear limits on the New York AG’s investigative authority, and the office is not constrained by the large body of guidance memorialized in the US Department of Justice’s manual for prosecutors and other published federal enforcement guidelines that help practitioners attempt to deal with regulators on a level playing field.
If you old folks don’t remember the Veg-O-Matic, I bet you remember the Bass-O-Matic. (I feel sorry for you kids today, I really do).
EDGAR’s On the Fritz Again
One of my colleagues was in the unenviable position of trying to file a couple of S-8s & an S-3 yesterday, and he learned to his chagrin that the EDGAR system was once again experiencing technical difficulties. According to the EDGAR News & Announcements page on the SEC’s website, they’re working on it:
The EDGAR system is currently experiencing technical difficulties. Our technical staff is working to resolve the issue. Please check this site for updates. We apologize for any inconvenience this may cause.
Fortunately, our registration statement filings were eventually accepted, and even though they didn’t show up on EDGAR until after 5:30 pm, we still received yesterday’s filing date. Still, I think my friend is starting to think the SEC is out to get him – he got caught up in the last malfunction trying to file a couple of 11-Ks.
– John Jenkins