Accounting Securities Class Action Filings Reach Record Levels in 2019

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Cornerstone Research report: Number and proportion of accounting-related securities class action settlements decline.

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"During 2019, plaintiffs increasingly filed core accounting cases against larger companies, particularly firms with market capitalization losses in excess of $1 billion." - Cornerstone Research Principal Frank T. Mascari

Plaintiffs filed a record number of securities class action lawsuits involving accounting allegations in 2019, as the overall trend of core filings against larger defendant firms continued, according to a report released today by Cornerstone Research. The total value of accounting-related class action settlements declined over the same period, but the median accounting case settlement amount rose.

The report, Accounting Class Action Filings and Settlements—2019 Review and Analysis, found that there were 169 securities class actions involving accounting allegations during 2019, up 18% from 143 in 2018. This was driven by increases in both core filings and those related to mergers and acquisitions. The total was nearly double the historical average and the highest percentage (42%) of total class action filings since 2011.

The number of accounting case settlements, however, continued to decline. The proportion of accounting settlements relative to all securities class action settlements declined to the lowest level over the past decade. Given that there is about a three-year lag between accounting case filings and settlements, this decrease may be attributed in part to the relatively low number of core filings during 2016-2018.

Total accounting case settlement value, which can fluctuate substantially from year to year due to the presence or absence of very large settlements, dropped to $920 million in 2019. There were no settlements exceeding $500 million and only two accounting case settlements over $100 million. The median accounting case settlement increased to $10.5 million, up from $9.7 million in 2018, reflecting an upward shift in the size of the typical settlement.

Core accounting case filings against larger defendant firms continued in 2019. The Disclosure Dollar Loss Index® (DDL Index®), a measure of market capitalization losses, reached its second-highest level in the last 10 years. Market capitalization losses for core accounting case filings were 58% higher than the historical average.

Author Commentary

Frank T. Mascari, principal: “During 2019, plaintiffs increasingly filed core accounting cases against larger companies, particularly firms with market capitalization losses in excess of $1 billion. Whether this trend continues in light of the current environment remains to be seen.”

Elaine M. Harwood, vice president: “The recent filings of COVID-19 related securities class actions suggest that the global pandemic will affect future securities litigation trends. Regulators and others are already focusing on the impact of COVID-19 on financial reporting disclosures and processes. We will continue to monitor these developments to determine whether they translate into accounting allegations in future securities class action filings.”

Laura E. Simmons, senior advisor: “In addition to potential effects from the current disruption in market conditions, the new accounting standard for revenue recognition is likely to impact future case filings and settlements. In 2019, we saw the first case filings involving allegations related to application of this standard.”


  • Core accounting case filings. There were 67 core accounting case filings in 2019, an increase of 5% from 2018 and 10% higher than the 2010–2018 average.
  • Defendant firm size. At $1.1 billion, the median market capitalization of issuer defendants in accounting case filings was 43% greater than the 2010–2018 average.
  • Restatements. There were 19 core accounting case filings involving financial statement restatements in 2019, up 46% from the previous year. The number of settled accounting cases involving restatements in 2019 was on par with the level in 2018; however, the proportion of those cases involving criminal allegations and/or accounting irregularities was the highest over the last 10 years.
  • SEC actions. The proportion of settled accounting cases involving accompanying SEC actions increased in 2019 to 44% of all accounting cases—the highest proportion since 1998.
  • Industry. For the second consecutive year, there were more core accounting case filings and accounting case settlements in the Consumer Non-Cyclical sector (including biotechnology, healthcare, and pharmaceutical companies) than any other sector.

About Accounting Cases

Cases are considered “accounting cases” if they involve allegations related to Generally Accepted Accounting Principles (GAAP) violations, violations of other reporting standards, auditing violations, or weaknesses in internal controls over financial reporting. Merger and acquisition filings are securities class actions that have Section 14 claims, but no Rule 10b-5, Section 11, or Section 12(2) claims, and involve M&A transactions. Core filings are all federal securities class actions excluding those defined as M&A filings.

About Cornerstone Research

Cornerstone Research provides economic and financial consulting and expert testimony in all phases of complex litigation and regulatory proceedings. The firm works with an extensive network of prominent faculty and industry practitioners to identify the best-qualified expert for each assignment. Cornerstone Research has earned a reputation for consistent high quality and effectiveness by delivering rigorous, state-of-the-art analysis for more than 30 years. The firm has over 700 staff and offices in Boston, Chicago, London, Los Angeles, New York, San Francisco, Silicon Valley, and Washington.

See Cornerstone Research’s website for more information about the firm’s capabilities in economic and financial consulting and expert testimony.
Twitter: @Cornerstone_Res

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