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Trends in Canadian Securities Class Actions: 2012 Update Pace of Filings and Settlements Falls; Auditor Risk and Court Rulings Take Centre Stage

13 February 2013
By Bradley Heys and Mark Berenblut

Nine new securities class actions were filed in Canada during 2012, according to this newly released edition of NERA's ongoing study, Trends in Canadian Securities Class Actions: 2012 Update. This is lower than the record 15 filings in 2011, and below the annual average of 12 cases per year since 2008.

The study's co-authors, Vice President Bradley A. Heys and Senior Vice President Mark L. Berenblut, report that all of the new filings for 2012 were shareholder class actions, and in contrast to previous years' filings, none involved allegations of Ponzi schemes, claims relating to the credit crisis, or claims against North American-listed Chinese companies. The abatement of these recent trends in filings was consistent with the experience in the US during 2012. However in 2012, none of the nine cases filed in Canada during 2012 appear to be related to  the surge in merger objection cases seen in the US over the last three years.

Three Canadian securities class actions were settled in 2012, excluding partial settlements -- two Bill 198 cases and one Ponzi scheme case. The median settlement for all Canadian securities class action settlements (excluding partial settlements) in NERA's database is $13 million. Notably in 2012, Ernst & Young agreed to pay $117 million to settle claims relating to its role as auditor of Chinese company Sino-Forest. This partial settlement, if approved, would represent the largest settlement in a Bill 198 case to date.

The authors also report that, with nine new securities class actions filed and the resolution of five cases during 2012, there were 51 active Canadian securities class actions at December 31. This is nearly double the number of active cases four years ago. NERA's database now includes data for 100 Canadian securities class actions filed since 1997.

NERA has been analyzing trends in securities class actions for more than 20 years. In addition to this Canada Trends report, the firm produces two US Trends studies annually, and reports for the UK, Australia, Japan, and Italy.