01 Apr 2015

Securities class actions over accountancy allegations rise

The SEC's heightened focus on fraud could be the reason behind the significant increase.

The SEC's focus on fraud could be the reason more class actions are focusing on accountancy issues American Spirit

Filings of securities class actions with accounting-related allegations increased significantly in 2014, according to a new Cornerstone Research report released yesterday. According to the company,  the sharp increase occurred against the backdrop of a year characterised by little change in securities class action filing activity. The report, Accounting Class Action Filings and Settlements—2014 Review and Analysis, also indicates that accounting settlements represented the majority of the number and dollar value of total settlements. 


After two years of relatively low activity, 69 new cases were filed with accounting allegations, compared with 47 in 2013 and 45 in 2012. At 70 per cent, the proportion of settlements involving accounting cases was at its highest level in four years. The share of total settlement dollars attributable to accounting cases rose from 25 percent in 2013 to 85 percent in 2014, returning to a more typical level. 'The surge in accounting-related securities class actions is particularly notable given the lack of change in the overall level of securities class action filings in the past year,' said Dr. Elaine Harwood, a vice president of Cornerstone Research and head of the firm’s accounting practice. 'The increase appears to be, at least in part, a result of the SEC’s heightened focus on accounting-related fraud as demonstrated by the substantial growth in accounting case filings that refer to inquiries or actions by the SEC.' Source: Cornerstone