SECURITIES LITIGATION

CD: Could you provide an overview of recent developments in securities litigation? How would you characterise activity levels?

Cooper: Securities litigations continue to be brought at significant levels in the US. Securities fraud class action filings under the Securities Exchange Act of 1934 were up in the first half of 2023 compared to the second half of 2022, and were on par with average filings over the last 25 years. New filings during the same period under the Securities Act of 1933 for new securities issuances and initial public offerings (IPOs), in contrast, were at the lowest levels in a decade. There have been no recent changes in the law or particular legal decisions that have had a significant impact over this area, although the slowdown in IPO activity and previous changes in the law making it harder to bring Securities Act claims in state court undoubtedly account for the decline in 1933 Act filings. The Supreme Court issued its decision in Slack Techs vs. Pirani in June 2023 related to direct listings of securities, but that decision merely reaffirmed the prior decades-old understanding of section 11’s tracing requirement, and will likely have little to no impact on new case filings.

Atkinson: Activity levels in securities cases are generally on par with where they have been over the last five years. However, studies show that the overall level of activity has significantly increased in the past 10 years. In 2016, after the Delaware Court of Chancery imposed more stringent requirements on disclosure-only settlements, there was a spike in the number of securities cases filed, particularly relating to M&A transactions. Interestingly, it appears that securities class actions have seen a gradual decline since 2016. It could be that plaintiffs’ attorneys sometimes favour individual actions over class actions due to the fact that settlements of individual actions receive less scrutiny from the courts than class settlements.

Jan-Mar 2024 issue

Cleary Gottlieb Steen & Hamilton LLP

Gibson, Dunn & Crutcher LLP

Kirkland & Ellis LLP

Sullivan & Cromwell LLP