Securities fraud suits fell to a 10-year low in 2006 due to a rising stock market, increased corporate controls and the indictment of one of the top investor law firms on charges it paid illegal kickbacks to clients.
Shareholders sued 120 companies for stock fraud this year through Dec. 29, according to data compiled by Bloomberg and the Stanford Law School Securities Class Action Clearinghouse. The total is the lowest since 1996, a year after Congress passed laws aimed at curbing securities fraud litigation.
The decline may stem from increased corporate governance rules and fraud prosecutions since 2002. That year, stock fraud suits hit a record high of 267 after an accounting scandal forced Enron Corp. to file the second biggest bankruptcy in U.S. history. The collapse ushered in passage of the Sarbanes-Oxley law, which imposed stricter accounting rules.
"After the Enron period, there weren't going to be as many high-profile scandals," said John C. Coffee Jr., a securities law professor at Columbia University in New York. He said the stock market's performance this year, and the May indictment of New York law firm Milberg Weiss & Bershad, may have also tamped down the number of securities fraud suits filed. "The stock market has been consistently up," he said.
See full Article.
Posts
