NU Online News Service, Jan. 24, 2:36 p.m.EST

Federal securities fraud class action filings related to mergersand acquisitions transactions were up in 2010, while filingsrelated to the credit crisis were down, according to an annualreport by Stanford Law School and Cornerstone Research.

Overall, the report, “SecuritiesClass Action Filings: 2010 Year in Review,” said filings pickedup in the second half of 2010 relative to the first half butremained down for the year compared to the annual average between1997 and 2009. Total 2010 filings numbered 176, while the annualaverage is 195. The 2010 filings are up from total 2009 filings of168.

The report said filings in the 2010 second half totaled 104compared to 72 in the first half.

Disclosure dollar losses in 2010 were $72 billion, compared to$84 billion in 2009 and $133 billion for the annual average.Maximum dollar losses were $474 billion in 2010, compared to $550billion in 2009 and $696 billion for the annual average.

The report defined disclosure dollar loss as the dollar valuechange in the defendant firm’s market capitalization between thetrading day immediately preceding the end of the class period andthe trading day immediately following the end of the classperiod.

Maximum dollar loss is the dollar value change in the defendantfirm’s market capitalization from the trading day with the highestmarket capitalization during the class period to the trading dayimmediately following the end of the class period.

Filings related to M&Atransactions increased 471 percent to 40 filings in 2010, comparedto just seven in 2009. Most of these filings alleged a breach offiduciary duty but did not allege stock price inflation, the reportsaid.

“One factor that may have contributed to the increase inM&A-related filings was the increase in the number of M&Adeals,” the report noted. But it added that the 20 percent increasein underlying M&A activity “seems insufficient to explainfully” the increased filings. Another reason may be “largely aresult of changes in plaintiff law firm behavior rather thanchanges in underlying market factors,” according to the report.

The report said filings related to the credit crisis were“sharply lower” in 2010, down to 13 such filings compared to 55 in2009 and 100 in 2008. “As the wave of credit crisis filingssubsided, filings in the financial sector decreased, as financialcompanies were defendants in 24.4 percent of 2010 filings comparedwith 47 percent in 2009,” stated the report.

Filings against Chinese companies rose in 2010, with 12 casesfiled against Chinese issuers, “a number representing 42.9 percentof the filings against foreign issuers,” the report said. It notedthat increased scrutiny on Chinese companies from investors andregulators could be a reason.

The report also said there were 10 filings against for-profitcolleges after a GAO report signaling that 15 for-profit collegesallegedly offered misleading or fraudulent information toundercover agents posing as prospective students. The GAO reportwas followed by U.S. Department of Education data showing thatstudent loan repayment rates were just 36 percent at for-profitcolleges compared to 54 percent at public colleges and 56 percentat nonprofit institutions.