Settlement Trends in Securities Class Actions

The number of settlements in securities class actions last year increased, according to Cornerstone Research’s Securities Class Action Settlements, 2021 Year in Review (here). During the same period there were three mega settlements that ranging from over $130 million to $187.5 million, according to the Report (here).

Last year the number of settlements in securities class actions reached a 10 year high. During the period 87 cases settled for a total of $1.8 billion. In contrast, the amount of the median settlement fell by 22% to $8.3 million. This is consistent with the fact that about 60% of the cases or 51 were resolved for less than $10 million with 14% settling under $2 million.

The largest group of settled cases last year were based on allegations of accounting irregularities. That group of cases was followed by those involving a restatement of the firm’s financial statements, actions centered on claimed GAAP violations and cases with no accounting regularities, according to Cornerstone. At the same time 43% of the settled cases were paralleled by a derivative action.

When settled action was paralleled by a SEC enforcement action, the case tended to have a higher settlement value the Report concluded. At the same time, it usually took about 30% longer to settle a securities class action paralleled by an SEC case.

Finally, Cornerstone found that the median time from filing to settlement hearing date was about 2.6 years in 2021.That is less than the 3 year period for cases that settled during the period 2012 – 2020. The decline appears to trace to settlements in the ninth circuit where the time to settlement declined by about 40% in 2021. The stage of the case at which cases settled, however, remained largely unchanged. Most most actions settled prior to the filing of a motion for class certification.