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Securities class-action lawsuits fall slightly after record-setting 2017 – report

The number of federal securities class-action lawsuits filed in 2018 dropped slightly from a record high in 2017, according to a report released Wednesday by Cornerstone Research and the Stanford Law School Securities Class Action Clearinghouse.

There were 403 securities class actions filed in 2018 compared to 412 the previous year. The number of core filings increased for the fifth straight year, this time to 221 from 214, reaching the highest level since 2008, when securities class actions surged due to volatility in U.S. and global financial markets, according to the report, "Securities Class Action Filings-2018 Year in Review."

Filings involving M&A transactions fell slightly to 182 from 2017's record high of 198.

Because the number of companies listed on major U.S. exchanges has decreased in recent years, the likelihood that a listed company would be targeted in a core filing in 2018 was greater than in any previous year, the report said. Of S&P 500 companies, 9.4% were sued in 2018.

"Securities class-action filings related to stock price drops reached levels not seen since the peak of the financial crisis, with the annual likelihood of such filings against exchange-listed companies at an all-time high," said Alexander "Sasha" Aganin, vice president at Cornerstone Research, in a news release.

The report's Maximum Dollar Loss index showed a 152% increase year-over-year, reaching $1.3 trillion in 2018 and eclipsing the $1 trillion plateau for the first time since 2002. The increase was driven by mega filings — filings with an MDL of at least $10 billion — which increased to 27 in 2018 from 14 in 2017, as well as the stock market decline late last year, which "magnified market value losses over class periods for many filings," the report said.

A March 2018 U.S. Supreme Court opinion will likely lead to more securities class-action filings in state courts, according to the report. In Cyan Inc. vs. Beaver County Employees Retirement Fund, the court issued a unanimous opinion allowing plaintiffs to assert claims under the Securities Act of 1933 in state courts. In 2018, the combined number of federal Section 11 filings — which allow investors to pursue damages for alleged misrepresentations or omissions in securities registration statements — and state 1933 Act filings was 41, a 52% increase compared to 2017.

A report similar in scope was published Tuesday by NERA Economic Consulting, which said there were 441 securities class actions filed in 2018, up from 434 in 2017.