Global exposure of publicly traded companies and their directors and officers to stock-drop securities class action (SCA) lawsuits that allege violations of the federal securities laws under Section 10(b) and 20(a) of the Securities Exchange Act of 1934 and SEC Rule 10b-5 promulgated thereunder, amounts to $37.7 billion in 2Q’21 – in line with $37.8 billion reported in 1Q’21.
U.S. SCA Rule 10b-5 Exposure of U.S. issuers amounts to $30.5 billion in 2Q’21, a decline of 9.2% relative to 1Q’21. ADR SCA Rule 10b-5 Exposure of non-U.S. issuers that trade via American Depositary Receipts (ADRs) on U.S. exchanges amounts to $7.2 billion in 2Q’21, a material increase of 68.2% relative to 1Q’21.
According to the SAR Securities Class Action Rule 10b-5 Exposure Report – 2Q 2021, the U.S. SCA Rule 10b-5 Exposure Rate of U.S. issuers declined to 0.06% in 2Q’21 from 0.08% in 1Q’21. The U.S. SCA Rule 10b-5 Litigation Rate declined by 13 basis points to 0.81% in 2Q’21.
In 2Q’21 the ADR SCA Rule 10b-5 Exposure Rate of non-U.S. issuers increased by one basis point to 0.02%. The ADR SCA Rule 10b-5 Litigation Rate decreased by 5 basis points to 0.15%.
“During 2Q of 2021, our data indicates that aggregate securities class action exposure of publicly traded companies in the U.S. has been the lowest since SAR began tracking this data,” said Nessim Mezrahi, CEO of SAR.
2Q 2021 Securities Class Action Landscape:
- 31 U.S. issuers were sued for alleged violations of Rule 10b-5. Based on allegations presented in the first-filed SCA complaint against each defendant corporation, U.S. SCA Rule 10b-5 Exposure amounts to $30.5 billion. Quarterly frequency declined slightly, and exposure declined by 9.2% relative to 1Q’21.
- 7 U.S. large cap issuers were sued for alleged violations of Rule 10b-5. The Large Cap SCA Rule 10b-5 Exposure amounts to $16.8 billion, a decline of 26.1% relative to 1Q’21. The Large Cap SCA Rule 10b-5 Exposure Rate decreased by 2 basis points to 0.04%. The Large Cap SCA Rule 10b-5 Litigation Rate decreased to 0.64% from 1.06% in 1Q’21.
- 6 U.S. mid cap issuers were sued for alleged violations of Rule 10b-5. The Mid Cap SCA Rule 10b-5 Exposure amounts to $8.5 billion, a material increase of $6 billion, or 256% relative to 1Q’21. The Mid Cap SCA Rule 10b-5 Exposure Rate increased to 0.52%. The Mid Cap SCA Rule 10b-5 Litigation Rate increased by 23 basis points to 0.85% in 2Q’21.
- 18 U.S. small cap issuers were sued for alleged violations of Rule 10b-5. The Small Cap SCA Rule 10b-5 Exposure amounts to $5.2 billion, a decrease of $3.2 billion, or 38% relative to 1Q’21. The Small Cap SCA Rule 10b-5 Exposure Rate decreased by 50 basis points to .65%. The Small Cap SCA Rule 10b-5 Litigation Rate decreased by 7 basis points to 0.90% relative to in 1Q’21.
- 3 non-U.S. issuers that trade via ADRs in the U.S. public markets were sued for alleged violations of Rule 10b-5. The ADR SCA Rule 10b-5 Exposure increased by $2.9 billion to $7.2 billion, or 68.2% relative to 1Q’21. The ADR SCA Rule 10b-5 Exposure Rate amounts to 0.02%, an increase of just 1 basis point relative to 1Q’21. The ADR SCA Rule 10b-5 Litigation Rate declined to 0.15%, 5 basis points lower relative to 1Q’21.