The financial crisis of 2007-2009 sparked an increase in securities litigation and enforcement actions that peaked in 2011. But 2015 is expected to mark the fourth straight decline in securities cases according to the Q1 2015 report by Advisen Executive Risk Network.
The report tracks various lawsuits and enforcement actions that could trigger coverage under a company’s D&O policy. It found the trend in declining securities litigation continued in Q1 2015, with derivative shareholder actions and merger objections accounting for the biggest year-over-year decline in lawsuits.
The report attributed a 2014 increase in the number of capital regulatory actions in part on an abundance of leads from the Dodd-Frank whistleblower program. There is a four year gestation period on these types of claims and Advisen expects there will be more enforcement actions in the next few years.
Litigation over the Foreign Corrupt Practices Act saw a significant increase as well, although the report made no mention of whether whistleblowers played a role in these actions. Since the companies generally disclose investigations to the government and investors well in advance of any actual enforcement action, they were probably only indirectly spurred by whistleblowers.
Although lawsuits coming out of the financial crisis may be on the decline, litigation against the financial sector continues to be the largest source of new filings, with thirty percent of the cases filed targeting them. The industrials, information technology and consumer discretionary are the next three most frequent targets of lawsuits and enforcement actions. Health care, the leading industry for lawsuits under the False Claims Act, is fifth in terms of securities litigation.
If you have questions about the SEC whistleblower law or have evidence of corporate wrongdoing, one of our SEC whistleblower attorneys can assist you. Please contact us or call 1-800-590-4116 to speak to a lawyer at McEldrew Young.