Litigation Breather


BUSINESS TRENDS

Investors filed 45% fewer class-action lawsuits alleging securities fraud in the first half of 2006 compared with the same period in 2005, according to a report by Stanford Law School’s Securities Class Action Clearinghouse. The 61 filings marked the lowest number for any six-month period since the first half of 1996.

So, why less litigation? Joseph Grundfest, Stanford University law professor and director of the Securities Class Action Clearinghouse, said one possibility is that corporate-governance initiatives have made it harder for plaintiffs to allege fraud.

The data should be interpreted with caution, however, said John Gould, vice-president of Cornerstone Research and a major contributor to the study. He said it’s too early to tell whether the numbers represent a long-term trend.

The study also found a decline of 44% in market capitalization losses related to securities fraud class-action lawsuits filed in the first half of 2006. The decline reflects both the lower number of filings and a lower average loss per filing.

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