More than two years after the Enron scandal broke and 17 months after the passage of the Sarbanes-Oxley Act (“SOX”), securities fraud cases continue to make headlines. Indeed, 2003 brought three of the six largest securities class action settlements of all time: Lucent Technologies, DaimlerChrysler, and Oxford Health Plans. But behind these extraordinary settlements are extraordinary investor losses, the single most powerful predictor of settlement size: these cases ranked first, second, and fifteenth in investor losses, respectively, among settled cases. Considering the amount of investor losses, the size of these settlements is less surprising. Overall, settlements are down: a closer look at 2003 settlements shows a downward trend in average and median settlement values and investor recovery rates little changed from their all-time low in 2002.

Seventeen months after SOX passed in July 2002, any immediate effects of the legislation on securities class actions would likely now be evident in the data. NERA’s research finds that while securities litigation continues to increase as a long-term trend, there is no statistically significant change in the number of filings or the size of settlements since the passage of SOX. The only statistically significant change since SOX relates to the frequency of dismissals, which remain down by one-third.

This update looks at federal class action litigation filings, settlement values, and dispositions between 1991 and 2003.