Shortly after the beginning of the year, Kevin LaCroix blogged on the D&O Diary about 2025 federal court securities suit filing rates. Filings were down during the year, after two years of increases. Kevin’s blog analyzes the conflicting trends that impacted filing rates last year and concludes that AI and crypto suits were up, while SPAC suits and, not surprisingly, COVID suits were down. Our attention, I think, should be focused on the increase in AI-related litigation, and numerous recent Bloomberg Law articles underscore this point. The piece “AI Demands Attention From Corporate Boards to Avoid SEC Scrutiny” from Squire Patton Boggs attorneys warns:

Every few years brings a shiny new source of systemic risk, and public companies have a well-worn habit of falling behind the curve. The sequence is almost predictable: The technology gains traction, and investors push for transparency. Companies then get ahead of themselves in published statements while plaintiff’s lawyers and the SEC begin testing and challenging those statements. As a result, corporate disclosures and governance structures get rebuilt under pressure.

We’ve seen this cycle play out with Y2K, perks cybersecurity, Covid-19, special purpose acquisition companies, climate, crypto, and environmental, social, and governance. AI presents another turn in that cycle, but boards have the opportunity to break it—if they act before the scrutiny arrives.

And that scrutiny is coming sooner rather than later. In “Event-Driven, AI Cases Dominate 2026 Securities Litigation Field,” Fried Frank attorneys warn that AI-related securities litigation will likely ramp up further in 2026, and even marketing language may present a securities litigation risk.

[Q]uantifying AI capabilities and measuring AI performance present a fundamental challenge for public companies. Securities litigation typically follows when optimistic projections cross the line into potentially actionable misrepresentations or when companies fail to adequately disclose potential limitations and risks of AI capabilities . . . For the foreseeable future, there will be considerable uncertainty about which AI-related statements courts will determine are potentially actionable.

As AI-related securities litigation continues its upward trajectory, companies should be mindful that what may seem like standard marketing language about AI capabilities may be understood by courts to be verifiable statements of fact.

Disclosure has truly exploded in recent years, with 55 10-Ks referencing about one AI-related term on average in 2019, compared to 444 (up 700%) in 2024, with an average of 19 references, according to Bloomberg Law.  There’s still time to consider your 10-K disclosures and how to improve your board oversight in 2026. Take a look at the recent law firm memos posted in our “Form 10-K” Practice Area; they all discuss AI disclosures. The Squire Patton Boggs article also shares some suggestions. As you meet with your Disclosure Committee and work through your 10-K, think about the following:

Management discussion and analysis. Does AI materially alter demand drivers or cost structures? Does it change how the company competes?

Risk factors. Does AI create new third-party dependencies or operational vulnerabilities? Are current cyber protections sufficient for AI-enabled threat vectors?

Internal controls. Do AI models influence financial inputs, value assumptions, audit workstreams, or forecasting tools? What testing and validation ensures those outputs are reliable?

And as you plan your board meetings, consider whether you’re building in time for boards to understand “how AI is embedded in the organization [and] management’s plans to expand its use.”

They need to know what safeguards govern the organization’s use of generative AI, especially around the use of confidential data or the completion of commercially sensitive tasks.They need to ask how the company is measuring return on AI initiatives and whether external messaging—to customers, employees, and investors—accurately reflect the company’s actual capabilities.They must weigh whether the adoption of AI by the company’s competitors puts pressure on the company’s business mode.

We cover SEC disclosure and corporate governance risks like these here, but if you’re on the front lines of risk management for AI, cyber, and other emerging technologies, be sure to subscribe to our AI Counsel Blog, where we roll up our sleeves and address some of the more granular issues that legal and compliance personnel are confronting when trying to manage the risks of emerging technologies.

– Meredith Ervine