The number of initial public offerings of stock, many under the Jumpstart Our Business Startups Act, has surged, and IPO-related litigation has increased as well.

There were 220 U.S. IPOs as of the third quarter, a 42% increase over the same period a year ago, according to Ernest & Young L.L.P. The technology, financial and energy sectors have been the largest issuers of IPOs.

While IPO-related litigation traditionally rises with IPOs, experts say the JOBS Act makes this latest round unique because the vast majority of IPOs have been filed under the 2012 law.

“I think it's fair to say that the altered landscape as a result of the JOBS Act could lead to additional ways in which plaintiff lawyers try to attack companies that benefited” from the legislation, said Carl E. Metzger, a partner with law firm Goodwin Procter L.L.P. in Boston.

Waves of IPO-related litigation in the past sometimes “takes on its own flavor,” said Brenda Shelly, New York-based managing director at Marsh L.L.C.'s FINPRO unit.

Under the law, emerging growth companies with total annual gross revenue of less than $1 billion are permitted to submit draft registration statements confidentially to the U.S. Securities and Exchange Commission and are exempt from the requirement of an auditor attesting to the effectiveness of a company's internal controls over financial reporting, among other provisions.

While experts say there are steps companies can take to win an early dismissal of IPO-related litigation or settle a case for a relatively small amount, the market for directors and officers liability insurance remains competitive although underwriters are somewhat wary of D&O coverage for JOBS Act-related IPOs.

Litigation typically is filed within three years of an IPO, usually in response to lower stock prices sparked by a company announcement.

“IPOs have always attracted a lot of attention from the plaintiffs bar because .... historically, Wall Street's enthusiasm for the IPO is very high, which sets very high expectations, and there's great demand for these new offerings,” said Peter Taffae, managing director of Los Angeles-based Executive Perils Insurance Services. But “quite often those expectations aren't met” by companies that may have little history and an unproven track record, he said.

IPOs are governed by Section 11 of the Securities Act of 1933, under which plaintiffs do not have to prove there was intent or knowledge of wrongdoing on the part of the issuers. This is not the case once a company has gone public and issues more stock, which falls under the Securities and Exchange Act of 1934.

In addition, the JOBS Act rolled back some provisions of the Sarbanes-Oxley Act of 2002 that were considered onerous and blamed for reducing the number of U.S. IPOs, prompting some companies to instead list their stock on foreign exchanges, said Trevor Howard, New York-based senior vice president of management liability at Liberty International Underwriters.

Jacqueline Urban, Chicago-based senior managing director and practice leader in Aon Risk Solutions financial services group, said the extent to which companies that launch an IPO under the JOBS Act do not follow the required procedures may leave them susceptible to improper or inadequate disclosure and other charges in litigation.

The theory of liability is the same, though — either information omitted from the registration statement, or misinformation included within it, caused someone to purchase the stock, she said.

Priya Cherian Huskins, partner and senior vice president at broker Woodruff-Sawyer & Co. in San Francisco, said a case typically is filed after a company makes an announcement, presumably with bad news, and the stock price drops.

Plaintiff attorneys are likely to take the position that the company's management and board of directors “knew that there was bad news coming around the corner but didn't tell the public so they could sell the stock at the higher price” at which it was sold before the announcement, she said.

“The No. 1 thing” to avoid successful litigation is to have good advisers so “the company can make sure that the timing is right for its initial public offering,” said Nathaniel D. McKitterick, a partner at DLA Piper L.L.P. in East Palo Alto, California.

“You need to be careful with your public pronouncements,” IPO materials and what is presented to investors, said Joseph Monteleone, a partner at Rivkin Radler L.L.P. in Hackensack, New Jersey.

It is also important for companies to consider the type and quantity of directors and officers liability insurance they obtain “so if they do get sued, they're well positioned to defend themselves,” said Kevin LaCroix, an attorney and executive vice president at RT ProExec, a division of R-T Specialty L.L.C., in Beachwood, Ohio.

When companies do settle IPO-related litigation, experts say factors that affect the size of the settlement include the amount the stock decreased in price, the amount of stock owned by the public, the strength of plaintiff allegations, whether allegations include insider trading or accounting irregularities, the success of procedural challenges, the size of the plaintiff class, and the availability of insurance and other funds to finance the settlement.