US securities class-action settlements tumble
* Fewest monetary accords since laws overhauled in 1995 -NERA
* Greater emphasis on lawsuits challenging mergers
* Pace of new securities lawsuits in line with recent trend
By Jonathan Stempel
July 24 (Reuters) - The pace at which investors bringing U.S. securities fraud cases are actually recovering money in settlements has fallen to the lowest since laws governing class-action litigation were overhauled in the mid-1990s.
Just 31 settlements yielded monetary compensation to investors between January and June, projecting to 62 for the full year, according to a study released Tuesday by NERA Economic Consulting.
That would be down from 87 monetary settlements in 2011, itself the fewest since adoption of the Private Securities Litigation Reform Act of 1995.
NERA attributed the decline to an increased emphasis on litigation challenging mergers. Such cases are often resolved when the target company provides additional disclosures to investors, and agrees to cover fees of those investors' lawyers.
Including settlements to resolve "merger objections," just 49 cases settled through June, according to NERA. That projects to 98 for the year, down from 123 in 2011, and the fewest since 1999.
In dollar terms, the average settlement excluding merger objection cases was $71 million from January to June, though NERA said the average was distorted by a $1.01 billion accord with the insurer American International Group Inc, the last portion of which won approval this year.
Excluding AIG and settlements over laddering in initial public offerings -- where underwriters inflate prices by handing out shares of hot IPOs to buyers who promise to buy more later -- the average settlement was $41 million, and the median was $7.9 million, NERA said. These amounts were in line with levels typical of the last five years.
The rate at which federal securities lawsuits seeking class-action status are being filed also mirrors recent levels.
NERA said 116 cases were filed from January to June, projecting to 232 for the year, up from 224 in 2011. The record high is 276, set in both 1998 and 2002.
Just 10 of the new cases related to Chinese companies, compared with 38 for all of 2011, reflecting what NERA called increased potential legal costs and tighter requirements for companies seeking U.S. listings through "reverse mergers."
The record high is 276, set in both 1998 and 2002.
The largest securities class-action settlement remains the $7.2 billion accord over the 2001 collapse of the energy company Enron Corp. (Reporting by Jonathan Stempel in New York; Editing by Gary Hill)
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