PwC Securities Litigation Study Shows Increase In Cases For Third Year : Big4.com

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Cases against Foreign Issuers dominated by Chinese

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Big4.com, the premier social networking forum for professionals and alumni of Accenture, Andersen, BearingPoint, Capgemini, Deloitte, Ernst & Young, KPMG and PricewaterhouseCoopers, PwC notes federal securities class action cases increased for the third consecutive year in 2011. The information comes from the 16th annual Securities Litigation Study released by PwC US.

Big4.com reports on new trends in the securities litigation arena as well like Mergers and Acquisitions (M&A)-related cases, which rose 17 percent and reached an all-time high in 2011. Forty-eight M&A-related cases were filed in 2011, representing the largest single category of non-accounting cases. Financial crisis filings, in contrast, hit their lowest point (nine cases filed) since the start of the financial downturn in 2008.

Patricia Etzold, partner at PwC commented:

“The dramatic rise in M&A cases signals that this ‘new’ focus of litigation may be here for some time to come,” she said. “This is a real game changer for the advisors involved in these deals. Given the increase in M&A litigation at the federal and state court level, this may be a good time for companies to evaluate their M&A process and criteria for selecting advisors. In light of the uptick in cases, companies may need to factor litigation risk into the timeline and costs associated with any transaction.”

PwC also saw cases against Foreign Issuers (FIs), rose by 126 percent in 2011. These were dominated by Chinese based companies. The 37 FI cases filed against China-based companies in 2011 accounted for 61 percent of FI cases and 19 percent of the 2011 total. The majority were against China-based companies entering the market through a reverse merger transaction, in which the China-based company merged with a publicly-traded U.S. shell company, as opposed to the traditional IPO process. China-based companies were also the target of 39 percent of accounting-related cases in 2011.

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Kristy Short
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