Introduction to Emerging Trends in Securities Litigation

As we look forward to 2025, the landscape of securities litigation is undergoing significant transformations. Investors must stay abreast of these emerging trends in securities litigation to protect their interests and make informed decisions.

The increasing complexity of financial instruments, the rise of digital assets, and the growing influence of environmental, social, and governance (ESG) factors are reshaping the legal environment for investors and companies alike.

This comprehensive guide provided investors with a deep understanding of these emerging trends in securities litigation, ensuring they are well-equipped to navigate the evolving legal terrain.

One of the most notable emerging trends in securities litigation is the surge in cases related to digital assets and cryptocurrencies. As these assets gain mainstream acceptance, regulatory scrutiny intensifies, leading to a rise in litigation involving fraud, market manipulation, and regulatory non-compliance.

Investors must be vigilant about the legal ramifications of their investments in digital assets and stay informed about the rapidly evolving regulatory landscape. Additionally, the advent of decentralized finance (DeFi) platforms introduces new complexities in securities litigation, necessitating a thorough understanding of smart contracts and blockchain technology.

Another critical trend is the increasing prominence of ESG factors in securities litigation. Companies are now facing heightened scrutiny regarding their environmental practices, social responsibility, and governance standards. Investors are becoming more proactive in holding companies accountable for their ESG performance, leading to a rise in litigation related to misleading ESG disclosures and greenwashing claims. This trend underscores the importance for investors to conduct comprehensive due diligence on a company’s ESG practices and ensure that their investment decisions align with their values and risk tolerance.

Moreover, global events such as the COVID-19 pandemic have significantly impacted securities litigation trends. The pandemic has exposed vulnerabilities in corporate governance and risk management practices, resulting in a wave of lawsuits related to inadequate disclosures and failure to mitigate pandemic-related risks. As we move forward, investors must be cognizant of how such global events can influence securities litigation and adjust their investment strategies accordingly.

In conclusion, staying informed about the emerging trends in securities litigation is crucial for investors navigating the complex financial landscape of 2025. By understanding the implications of digital assets, ESG factors, and global events on securities litigation, investors can make more informed decisions and safeguard their investments against potential legal challenges. This comprehensive guide serves as a valuable resource for investors seeking to stay ahead of the curve in an ever-evolving legal environment.

Trends in Securties Class Action Settlements

• Number of Settlements: The number of settlements increased slightly in 2024 compared to 2023 (88 vs. 83). After a six-year decline, resolutions increased by 17% with 217 cases resolved in 2024.
• Settlement Amounts:
  • The median settlement amount declined in 2024 compared to 2023 ($14 million vs. $15 million). This is potentially due to a decrease in “plaintiff-style damages” (a proxy for investor losses).
  • However, if settlements exceeding $1 billion are excluded, the average settlement in 2024 ($43 million) is substantially greater than the inflation-adjusted average in 2023 ($35 million). The average settlement value in 2024 ($43 million) is also the highest since 2016.
  • Total settlement dollars in 2024 were $3.8 billion, with the top 10 settlements accounting for approximately 60% of this amount.

Mega Settlements

• There was a total of seven mega-settlements in 2024, or two fewer than the nine in 2023. These seven mega-settlements contributed over half (54%) of the total settlement value for 2024.

Industry Trends:

• The Technology sector continues to be the most frequently sued industry, surpassing its 10-year average.
• The Consumer Non-Cyclical sector, including biotechnology and pharmaceutical companies, saw the most filings in 2024, representing a 24% increase year-over-year. Biotechnology companies, in particular, experienced a rise in filings in the second half of 2024.
• The percentage of “Health and Technology Services” and “Electronic Technology and Technology Services” filings increased in 2024, reaching levels last seen in 2021.
• Finance sector filings decreased from 18% in 2023 to 10% in 2024.

Allegations in Securities Class Actions:

• Allegations related to missed earnings guidance accounted for 41% of filings in 2024, while only 8% involved merger-integration issues.
• AI-related claims more than doubled in 2024 compared to 2023 (13 suits vs. 7), suggesting a growing trend. The percentage of securities class actions tied to AI increased from 4% in 2023 to 7% in 2024.
• COVID-19 related claims also increased (19 filings vs. 11 in 2023) but remained below the peak of 20 in 2022.
• Filings related to SPACs, cybersecurity, and cryptocurrency continued to decline in 2024.

Trends in Securties Class Action Settlements:

• Number of Settlements: The number of settlements increased slightly in 2024 compared to 2023 (88 vs. 83). After a six-year decline, resolutions increased by 17% with 217 cases resolved in 2024.
• Settlement Amounts:
  • The median settlement amount declined in 2024 compared to 2023 ($14 million vs. $15 million). This is potentially due to a decrease in “plaintiff-style damages” (a proxy for investor losses).
  • However, if settlements exceeding $1 billion are excluded, the average settlement in 2024 ($43 million) is substantially greater than the inflation-adjusted average in 2023 ($35 million). The average settlement value in 2024 ($43 million) is also the highest since 2016.
  • Total settlement dollars in 2024 were $3.8 billion, with the top 10 settlements accounting for approximately 60% of this amount.

Future Trends in Securities Class Actions

Securities class actions have long been a mechanism for investors to seek redress for corporate misconduct and malfeasance. As we look toward the future, several trends are likely to shape the landscape of these lawsuits. One significant trend is the increasing globalization of securities markets. As more companies operate on an international scale, securities class actions are expected to become more complex and involve multiple jurisdictions.

This globalization will necessitate comprehensive corporate governance practices that can withstand scrutiny across different legal systems and regulatory environments. Consequently, corporations will need to be more vigilant in their compliance efforts, ensuring that they adhere to the standards of not just their home country but also those of other nations where they have a significant presence.

Another future trend in securities class actions is the growing influence of technology and data analytics. With advancements in artificial intelligence and machine learning, plaintiffs’ attorneys will have enhanced tools to identify patterns of corporate behavior that may indicate fraud or other wrongdoing.

These technologies can sift through vast amounts of data much more efficiently than traditional methods, making it easier to build a strong case against companies accused of securities violations. On the flip side, corporations can also leverage these technologies to improve their internal controls and detect potential issues before they escalate into full-blown legal disputes. The integration of advanced technology into both litigation strategies and corporate governance frameworks will thus play a critical role in shaping future securities class actions.

Environmental, social, and governance (ESG) factors are also poised to become a central focus in securities class actions. Investors are increasingly holding companies accountable not just for their financial performance but also for their impact on society and the environment. As such, failures in ESG practices could lead to a rise in securities class actions, with plaintiffs arguing that companies misrepresented their commitment to sustainable practices or failed to disclose relevant risks.

This shift underscores the importance of robust corporate governance structures that can effectively manage ESG-related risks and ensure transparency in corporate disclosures. Companies will need to prioritize ESG issues in their strategic planning and reporting to mitigate the risk of future litigation.

Regulatory changes and evolving legal standards are another area to watch. Governments and regulatory bodies worldwide are continually updating securities laws to address new challenges and protect investors better. These changes can significantly impact how securities class actions are conducted and resolved.

For instance, stricter disclosure requirements or enhanced penalties for non-compliance could lead to an increase in the number of class actions filed. Corporate governance practices will need to adapt accordingly, ensuring that companies stay ahead of regulatory developments and maintain robust compliance programs.

In conclusion, the future trends in securities class actions will be shaped by globalization, technological advancements, ESG considerations, and regulatory changes. Companies will need to adopt proactive corporate governance measures to navigate this evolving landscape effectively. By doing so, they can not only reduce their litigation risk but also build trust with investors and other stakeholders, ultimately contributing to their long-term success.

Key aspect:

• Market Integration: Globalization has led to enhanced integration of financial markets, enabling seamless interactions between domestic and international markets. This manifests through cross-border investments (e.g., U.S. investors buying shares in European or Asian companies), harmonization of regulations promoted by international organizations like the IMF, and the use of global benchmarks like the MSCI World Index.
• Increased Capital Mobility: Barriers to capital flows have been significantly reduced, allowing funds to move swiftly across borders. This facilitates foreign direct investment (FDI) and portfolio investments, which can drive economic growth and development, particularly in emerging markets like China and India. Companies and governments also gain access to global capital for fundraising through avenues like bond issuances or IPOs in international markets.
• Technological Advancements: Globalization is closely intertwined with rapid technological progress, fundamentally transforming financial markets. High-speed trading (HFT) and FinTech innovations like robo-advisors and blockchain-based systems have enhanced market efficiency and accessibility. Real-time data dissemination empowers investors with faster access to information, enabling more informed decision-making.
• Rise of Emerging Markets: Globalization has significantly elevated the role of emerging markets in the global financial system. Countries like China and India have developed robust financial markets, attracting global investors and offering diversification opportunities. 

Driving forces

• • Political Factors: Favorable trade policies, government regulations, and international agreements facilitate cross-border financial activities.
  • Technological Factors: Advancements in communication and transportation technologies have reduced costs and inefficiencies, fostering quicker connections between markets globally.
  • Market Factors: The convergence of consumer preferences across different regions enables businesses to scale their marketing efforts globally.
  • Cost Factors: Differences in wages and production costs across countries incentivize companies to outsource and manufacture in locations with lower costs.
  • Competitive Factors: The actions of global competitors compel businesses to adopt a global perspective in their strategies to maintain or gain market share. 

Challenges and risks

• Increased Volatility and Systemic Risks: Integrated markets are more susceptible to contagion, where a crisis in one market can rapidly spread globally. Easy access to capital can fuel asset bubbles and currency risks stemming from exchange rate fluctuations.
• Regulatory Challenges: The absence of a unified global investor protection scheme can lead to companies choosing markets with weaker regulations, potentially harming investors and creating a “race to the bottom” in terms of investor safeguards. Harmonizing regulations across different jurisdictions is a significant challenge.
• Potential for Inequality: Critics argue that globalization of securities markets can exacerbate inequality, particularly in developed countries where job outsourcing to developing countries can displace domestic workers and potentially depress wages and working conditions.
• Economic Risks and Imbalances: Major market shocks, like the COVID-19 pandemic, highlight the economic risks associated with globalization of securities markets, including supply chain disruptions and trade imbalances, according to Omnipresent.
• Environmental and Ethical Concerns: Increased global trade and transportation networks contribute to environmental concerns like fuel use and greenhouse gas emissions. Ethical concerns regarding worker exploitation in certain labor markets also arise.

The globalization of securities markets presents a complex interplay of opportunities and challenges. While fostering economic growth, efficiency, and investment opportunities, it necessitates careful navigation of risks related to volatility, regulatory discrepancies, and potential societal impacts.

Robust Corporate Governance Structures that Can Effectively Manage ESG-Related Risks

A strong and well-defined corporate governance structure is fundamental to effectively managing Environmental, Social, and Governance (ESG) related risks. In fact, governance is often considered the foundation (“G” in ESG) upon which successful environmental and social initiatives are built.

1. Ensuring board oversight and accountability

• A well-structured corporate governance framework ensures the board of directors has the necessary expertise and diversity to effectively oversee ESG matters.
• Boards are responsible for setting ESG goals, approving policies, and monitoring progress, thereby establishing accountability at the highest levels.
• Dedicated ESG committees can be established to monitor regulatory changes, assess ESG risks and opportunities, and ensure that ESG considerations are integrated into business strategy.

2. Integrating ESG into risk management frameworks

• An effective ESG corporate governance structure involves embedding ESG factors into a company’s overall risk management strategy.
• Robust risk management procedures help identify, assess, and mitigate ESG-related risks such as environmental liabilities, reputational issues, or governance failures.
• This approach enables companies to proactively manage these risks rather than simply reacting to crises. 

3. Promoting transparency and reporting

• A Strongcorporate governance structure leads to greater disclosure and transparency, allowing capital flows to shift to sustainable investment opportunities.
• Companies should adopt rigorous ESG reporting practices aligned with international standards like GRI, TCFD, and CSRD to ensure transparency and accountability.
• This provides stakeholders, including investors and regulators, with a clear understanding of a company’s ESG performance and risk management strategies, and more robust corporate governance.

4. Driving ethical conduct and compliance

• Robust corporate governance emphasizes a culture of ethical conduct and integrity throughout the organization.
• This includes implementing policies against corruption, ensuring regulatory compliance, and fostering a culture where ethical considerations are paramount in decision-making.
• By embedding ethics and accountability, companies can minimize the likelihood of governance failures and associated risks. 

5. Engaging with stakeholders

• An effective corporate governance structure includes mechanisms for regular dialogue with stakeholders, such as investors, employees, customers, and the community.
• Understanding stakeholder perspectives helps companies tailor ESG strategies to address their concerns and build stronger relationships.

6. Enhancing long-term value creation

• A strong ESG corporate governance structure shifts the focus from short-term gains to long-term sustainability and value creation.
• Companies that integrate ESG into their DNA create a leadership culture that prioritizes long-term thinking, resulting in improved risk management, operational efficiencies, and enhanced brand reputation.
• By attracting ESG-focused investors and potentially accessing lower-cost capital, companies with strong governance can secure a competitive advantage in the market. 

The Impact of the COVID-19 Pandemic Going Forward

Lingering health challenges

Key Takeaways:

These trends highlight the dynamic nature of securities litigation, with new challenges arising alongside ongoing concerns about corporate governance, disclosure practices, and investor protection. Staying informed about these developments is essential for companies, investors, and legal professionals to effectively manage risks and navigate this evolving environment

Conclusion

As we look ahead, it is evident that the landscape of securities class actions is poised for significant evolution. Emerging Trends in Securities Litigation are shaping the future of this legal domain, driven by technological advancements, regulatory changes, and evolving market dynamics. One key trend is the increasing reliance on artificial intelligence and machine learning to detect and prevent fraudulent activities, which could lead to more sophisticated and timely securities class actions.

Additionally, the global nature of financial markets is prompting a rise in cross-border litigation, as investors seek redress for losses incurred in foreign jurisdictions. The regulatory environment is also becoming more stringent, with agencies like the SEC implementing stricter enforcement measures, thereby influencing the volume and complexity of securities litigation. Furthermore, environmental, social, and governance (ESG) factors are gaining prominence, resulting in a surge of class actions related to corporate disclosures on sustainability practices.

As these emerging trends in securities litigation continue to unfold, they will undoubtedly shape the strategies of plaintiffs and defendants alike, making it imperative for legal practitioners to stay abreast of these developments to effectively navigate this evolving landscape.