Federal securities class actions continue to decrease

The 205 new federal securities class actions filed last year continued a four-year decline, totaling less than half of 2018’s 432 cases, says a report issued Tuesday.

The decline was largely because of the lower number of merger objection and Rule 10b-5 cases filed last year, according to the report by New York-based NERA Economic Consulting.

10b-5 is a U.S. Securities and Exchange Commission regulation that states it is unlawful for anyone to operate a fraud in connection with the purchase or sale of any security.

The number of dismissed or settled cases declined to 214 in 2022 compared with 248 in 2021, but aggregate settlements totaled $4 billion, more than double 2021’s inflation-adjusted total of $1.9 billion.

The most common cases filed last year were against defendants in the health technology and services and the electronic technology and services sectors, with each accounting for 27% of the total, according to the report.

Most of the new filings continued to be concentrated in the 2nd, 3rd and 9th U.S. Circuits Courts of Appeal in New York, Philadelphia and San Francisco, respectively, the report said.

Of the cases filed, the most common allegation was related to a misled future performance, which accounted for 33% of the total, while the percentage related to regulatory issues increased to 26% last year vs. 19% in 2021, the report said.

There were 25 cryptocurrency-related securities class actions filed last year, compared with 10 in 2021.