Securities class action settlements grew 142% globally in 2022
Settlement recovery opportunities topped $7.4bn last year according to new report from Broadridge as market rebounded after Covid-19 pandemic
Last year was one of the busiest years for the global securities class action litigation industry, according to a new research from Broadridge Financial Solutions.
The Broadridge Global Class Actions Report found that there were more than 160 separate claim filing deadlines in 2022 – an increase of 21% compared to the year before – with total settlement value exceeding $7.4bn, representing an eye-catching 142% increase.
Broadridge also identified more than 240 newly filed class or collective actions worldwide related to investments in publicly traded securities, bringing the total number of active cases the company is tracking but that have not settled in excess of 900.
Steve Cirami, Broadridge global class actions leader, said: “By most metrics, securities settlement activity in 2022 drove one of the busiest years we’ve ever seen, led by more than ten mega-settlements exceeding $100m, including [the Steinhoff Global Settlement] the second largest securities settlement outside North America.”
Total new filings are down compared to pre-pandemic levels, however, which the report attributed to a substantial reduction in the number of merger and acquisition class action cases being filed, which at its peak accounted for nearly half of all securities class action cases in US courts. It noted that such cases are now being filed as individual cases, without class allegations.
The report also looked at key trends in global class actions, including:
Ongoing focus on ESG. Against a background of growing ESG investment, which Broadridge expects will reach $30trn by 2030, investors are increasingly viewing class and collective actions with ESG at their core as an effective way to enforce their ESG policies and goals. This combined with regulators worldwide looking to crack down on ESG greenwashing and more event-driven securities litigation means the upward trend of ESG-related class actions will remain strong.
Growth in opt-in jurisdictions and the rise in collective investor actions. Each year the report features new laws or jurisdictions that permit collective actions. In 2022, New Zealand’s Law Commission told the country’s parliament there was ‘a clear need for a group litigation mechanism that can resolve claims justly and efficiently’. Meantime, the Monetary Authority of Singapore announced its investigation into enhancing investors’ recourse for losses due to securities market misconduct, which may include permitting third-party litigation financing, and an EU directive requiring member states to either devise or amend their collective redress regimes was concluded.
SPAC and cryptocurrency-related securities litigations continued trending upwards in 2022 but the report does not expect that to continue this year given that SPACs have significantly fallen out of vogue, with a nearly 90% decrease in the number of SPAC IPOs from 2021 to 2022.
Broker-Dealers shift in service. Broker-dealers continue to look for ways to better serve their customers by providing claim-filing and asset recovery services in addition to providing notice to their retail customers, the report noted. Broadridge said that as a direct result of this shift, it had filed more claims than in previous years by a wide margin, and onboarded more broker-dealer clients than in any prior year.
Broadridge is a public corporate services and financial technology company based in New York. To compile the report the company identified more than 160 global cases in its database involving securities and/or financial products with a claim filing deadline in 2022.
A survey published in December that tested the UK public’s enthusiasm for class actions found that 60% of respondents would join a claim against a company if directly affected by its alleged illegal activities.
Portland Communications’ third annual Class Action Survey, which polled more than 2,000 people in the UK, concluded that enthusiasm for class actions ‘remains high’ despite the fact that that group claims ‘continue to carry a degree of reputational baggage risk as a US “import” into the English legal system’.
An increase in the number of securities class actions, fuelled by the litigation funding market, and a shift in investor appetite, was one of five trends for 2023 identified by Pallas Partners founder and managing partner Natasha Harrison in a commentary for GLP.