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Advisen Report Finds That Drop in Q2 Securities Suits May Be a Brief Lull.

However, Securities Class Action Suits Likely to Decrease in Significance

NEW YORK -- Following a hyperactive first quarter, in which 221 securities lawsuits were filed, the second quarter tally plummeted to 140 suits, which is in line with recent norms according to a new report from Advisen Ltd. However, an uptick in securities class action suits filed in the first few weeks of the third quarter suggests that the second quarter was only a breather in what is shaping up to be an active year for securities litigation.

"The drop in cases filed in the second quarter was led by a sharp decrease in securities class action suits," explained John W. Molka III, CFA, Senior Industry Analyst and author of the report. "There were 37 securities class action suits filed in the second quarter, down from 70 cases the quarter before. But the pace has picked up a bit again in July. As has been the case over the past couple of years, companies in the financial sector were especially in the plaintiff bar's crosshairs."

Federal securities class action suits represent a large portion of securities suits against public companies, but they no longer account for the majority of securities suits, as was the case in the past. In the second quarter, securities fraud suits filed by regulatory and law enforcement agencies were the most frequent type of claim filed. Securities class action suits were tied for second place with breach of fiduciary liabilities suits, which often are filed in state courts.

"The increase in securities fraud suits is almost certainly a harbinger of things to come," said Dave Bradford, executive vice president of Advisen. "Many of these suits are filed by the US Securities and Exchange Commission, which has been revitalized under the Obama administration. The Commission already is staffing up with enforcement personnel."

The meltdown of the subprime mortgage market and the ensuing credit crisis was the most significant source of securities suits in 2007 and 2008. The Bernard Madoff Ponzi scheme drove new filings in the first quarter of 2009. While still representing important sources of new filings, both diminished in significance in the second quarter. These events are likely to remain major sources of new securities suits, but indicators suggest that the tidal wave of new claims may have crested.

The report also highlights important securities case awards and settlements during the quarter, led by the nearly $2.9 billion resolution of a derivative action suit against former HealthSouth CEO Richard Scrushy. Also significant were awards and settlements from suits litigated outside the US, particularly the $371 million settlement in the Netherlands of a shareholder suit against Royal Dutch Shell.

The report, "Securities Litigation Drops in Q2 2009: An Advisen Quarterly Report - Q2 2009," can be downloaded at the Advisen Corner, http://corner.advisen.com. A list of the 140 Q2 securities suits, as well as other suits from Advisen's Master Significant Case and Action Database (MSCAd) can be purchased at the same web address.

Advisen's John Molka will present a summary of the report findings in a free webinar on Monday, August 3 at 11am EDT. The webinar also will feature a panel discussion by leading D&O insurance experts, including Chubb's Randy Hein, Marsh's Tripp Sheehan, The D&O Diary's Kevin LaCroix and Advisen's Dave Bradford. Advisen's Jim Blinn will moderate the panel. In addition to reviewing litigation trends, the panel will discuss the application of models for risk analysis and rating of D&O litigation exposure by brokers and underwriters. Register for this free one hour Advisen webinar at https://www1.gotomeeting.com/register/118130624.

About Advisen

Advisen integrates business information and market data for the commercial insurance industry and maintains critical risk analytics and time-saving workflow tools for over 530 industry leading firms. Through its work for the broadest customer base among information service providers, Advisen delivers actionable information and risk models at a fraction of the cost to have them built internally. Designed and evolved by risk and insurance experts, and used daily by more than 100,000 professionals, Advisen combines the industry's deepest data sets with proprietary analytics and offers insight into risk and insurance that is not available on any other system. Advisen is headquartered in New York. For more information, visit http://www.advisen.com or call +1.212.897.4800 in New York or +44(0)20.7929.5929 in London.
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Publication:Business Wire
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Date:Jul 31, 2009
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