The number of accounting-related securities class-action filings increased for the third year in a row in 2015, according to a new report.
There were 71 filings with accounting allegations in 2015, according to Cornerstone Research’s report, Accounting Class Action Filings and Settlements—2015 Review and Analysis.
“Not only did the number of accounting case filings increase in 2015, the market capitalization losses associated with those filings jumped as well,” said Elaine Harwood, a vice president of Cornerstone Research and head of the firm’s accounting practice, in a statement. “The increase is attributable, in part, to accounting cases filed against NYSE-listed firms. The market capitalization losses associated with those filings more than doubled in 2015.”
Accounting case settlement dollars reached $2.6 billion in 2015. “The total settlement value for cases with accounting allegations in 2015 was almost three times the level for 2014,” said Cornerstone Research senior advisor Laura Simmons. “Looking at overall settlement dollars for 2015, accounting cases represented 87 percent of the total value.”
According to the report, the Disclosure Dollar Loss Index for accounting cases filed in 2015 rose to $34.8 billion, the second-largest amount in the last seven years.
In 2015, 37 percent of accounting cases were filed in the Ninth Circuit—more than any other circuit.
The number of accounting cases against companies with headquarters outside the United States increased 43 percent to its second highest level in the last 10 years. Accounting cases against companies headquartered in China increased 75 percent from 2014 to 2015.
Accounting case filings involving company announcements of internal control weaknesses were the highest in 10 years. The DDL Index for filings with allegations related to accounting restatements was smaller than for other types of accounting case filings in 2015.
Accounting cases in 2015 had a median filing lag of eight days between the end of the alleged class period and the filing date of the lawsuit, the shortest in 10 years.
In 2015, 86 percent of accounting case settlements involved allegations of internal control weaknesses—the highest proportion in the last 10 years.
For settled cases with GAAP allegations, settlement amounts were highest for matters involving write-downs.
Following a sharp decrease in 2014, the proportion of accounting settlement dollars represented by financial firms led all sectors in 2015. This increase reflects 11 settlements averaging over $133 million.
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