July 14, 2020

Volume X, Number 196

July 14, 2020

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July 13, 2020

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Accounting Securities Class Action Filings Reach Record Levels in 2019

Number and proportion of accounting-related securities class action settlements decline.

Plaintiffs filed a record number of securities class action lawsuits involving accounting allegations in 2019, as the overall trend of core filings against larger defendant firms continued, according to a report released by Cornerstone Research. The total value of accounting-related class action settlements declined over the same period, but the median accounting case settlement amount rose.

The report, Accounting Class Action Filings and Settlements—2019 Review and Analysis, found that there were 169 securities class actions involving accounting allegations during 2019, up 18% from 143 in 2018. This was driven by increases in both core filings and those related to mergers and acquisitions. The total was nearly double the historical average and the highest percentage (42%) of total class action filings since 2011.

Regulators and others are already focusing on the impact of COVID-19 on financial reporting disclosures and processes.

The number of accounting case settlements, however, continued to decline. The proportion of accounting settlements relative to all securities class action settlements declined to the lowest level over the past decade. Given that there is about a three-year lag between accounting case filings and settlements, this decrease may be attributed in part to the relatively low number of core filings during 2016–2018.

Total accounting case settlement value, which can fluctuate substantially from year to year due to the presence or absence of very large settlements, dropped to $920 million in 2019. There were no settlements exceeding $500 million and only two accounting case settlements over $100 million. The median accounting case settlement increased to $10.5 million, up from $9.7 million 2018, reflecting an upward shift in the size of the typical settlement.

Core accounting case filings against larger defendant firms continued in 2019. The Disclosure Dollar Loss Index® (DDL Index®), a measure of market capitalization losses, reached its second-highest level in the last 10 years. Market capitalization losses for core accounting case filings were 58% higher than the historical average.


  • Core accounting case filings. There were 67 core accounting case filings in 2019, an increase of 5% from 2018 and 10% higher than the 2010–2018 average.
  • Defendant firm size. At $1.1 billion, the median market capitalization of issuer defendants in accounting case filings was 43% greater than the 2010–2018 average.
  • Restatements. There were 19 core accounting case filings involving financial statement restatements in 2019, up 46% from the previous year. The number of settled accounting cases involving restatements in 2019 was on par with the level in 2018; however, the proportion of those cases involving criminal allegations and/or accounting irregularities was the highest over the last 10 years.
  • SEC actions. The proportion of settled accounting cases involving accompanying SEC actions increased in 2019 to 44% of all accounting cases—the highest proportion since 1998.
  • Industry. For the second consecutive year, there were more core accounting case filings and accounting case settlements in the Consumer Non-Cyclical sector (including biotechnology, healthcare, and pharmaceutical companies) than any other sector.

Read the report: Accounting Class Action Filings and Settlements—2019 Review and Analysis.

Copyright ©2020 Cornerstone ResearchNational Law Review, Volume X, Number 86


About this Author

Elaine M. Harwood, Vice President, Accounting Practice, Cornerstone Research
Vice President

Elaine Harwood heads the firm’s accounting practice. She consults to clients and works with experts on securities litigation, complex enforcement matters brought by the Securities and Exchange Commission (SEC) and Public Company Accounting Oversight Board (PCAOB), and corporate investigations. She is an expert on financial accounting, financial reporting, and auditing. Dr. Harwood has served for more than fifteen years as a consultant and expert on a wide range of liability and damages issues.


Securities litigation...

Laura E. Simmons, CPA, Certified Public Accountant, Finance Consulting, Cornerstone Research
Senior Advisor

Laura Simmons is a certified public accountant (CPA) and has more than twenty years of experience in accounting practice and economic and financial consulting. She has focused on damages and liability issues in litigation involving securities and the Employee Retirement Income Security Act, as well as on accounting issues arising in a variety of complex commercial litigation matters. She has served as a testifying expert in cases involving accounting analyses, securities case damages, and research on securities lawsuits.

Dr. Simmons’s research on pre– and post–Reform Act securities litigation settlements has been published in a number of reports and is frequently cited in the public press and legal journals. She has spoken at various conferences and appeared as a guest on CNBC addressing the topic of securities case settlements. She has also published in academic journals, with recent research focusing on the intersection of accounting and litigation.

Dr. Simmons was an accounting faculty member at the Mason School of Business at the College of William & Mary from 2008 through 2011. Prior to her work in academia, she spent more than ten years as a consultant at Cornerstone Research, most recently as a principal. Dr. Simmons developed the firm’s research on securities case settlements and the related settlements prediction model. She was also an accountant with Price Waterhouse for approximately five years.

Frank T. Mascari, Financial and Accounting Consulting, Cornerstone Research

Frank Mascari is a principal in the Chicago office of Cornerstone Research. Mr. Mascari has more than twenty years of experience providing financial and accounting consulting services in commercial litigation and fraud investigation matters. He has worked on a variety of issues related to post-acquisition disputes, accounting malpractice, and commercial damages matters.

Accounting and Auditing

  • Assessed damages, liability, and causation claims related to financial reporting fraud and accounting...