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Securities

Dip in securities class actions not a surprise

It is not surprising that there were fewer securities class actions filed in Canada in 2012, says Toronto litigator Brian Radnoff.

“The greatest cause of the decrease is the fact that markets were generally stable, if not good, in Canada in 2012,” says Radnoff. “The greatest driver of securities class actions are poor markets, particularly after market bubbles, when equities can fall considerably.

“Bubbles also seem to create more opportunities for improper and fraudulent behaviour. Without significant damages, there is no claim nor any incentive for plaintiff lawyers to bring claims, and in stable or good markets, there are normally fewer opportunities to bring claims.”



A recent Financial Post article reports fewer securities class actions were filed last year, according to data compiled by the NERA Economic Consulting.  Read Financial Post

The number of securities class action cases dipped to nine for 2012, down from the record 15 that were issued in 2011, according to NERA’s report, the Post article says.

“In general, this news is consistent with the typical cycles one would expect to see and the relationship between securities class actions and what is going on in the markets,” says Radnoff. “A secondary reason is likely the growing experience in Ontario with secondary market claims and the difficulties plaintiffs’ counsel have experienced in getting leave to bring them. Plaintiffs’ counsel are likely becoming more selective about the cases that are brought and the difficult requirements for leave to bring such claims have been better defined by the courts.”

Radnoff believes that the current trend will not continue as institutional investors become more involved in securities litigation.

“Institutional investors are starting to be more active plaintiffs in Canada, which has been a feature of US securities class actions for many years,” he says. “As institutional investors, who have greater resources than individual plaintiffs, become the drivers of these cases, it is likely we will see more of them in Canada.”

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