Securities Fraud Class Filings Surged in '07

The subprime mortgage crisis and stock market volatility are the likely causes of a 43% increase in securities fraud class action litigation filings in 2007, according to a study from Stanford Law School and Cornerstone Research.Joseph Grundfest, director of the Stanford Law School Securities Class Action Clearinghouse, said if litigation related to the subprime crisis is removed from the calculation, "the resulting core litigation rate remains well below historical norms." Forty-seven firms in the finance sector were sued in 2007, compared with just 11 in 2006. The problems in subprime lending contributed to the increase, with 28 of the 2007 filings related to subprime market disclosure issues. There were 100 securities class action filings in the second half of the year, compared with 66 in the first half. For all of 2006, there were 116 filings. John Gould, vice president of Cornerstone Research, said: "[W]hile it is likely that both the subprime crisis and the increase in stock market volatility contributed to the increase in filings in the second half of the year, it is not possible, as a technical matter, to separate these two effects."