In my last post I addressed the decline in securities class action filings over the decade from 2001-10. Utilizing SLA’s database I highlighted the concurrent decrease in restatement-related cases and postulated that Sarbanes-Oxley regulation played a role in modulating corporate restatement filings. As the nature of cases changed during this period so did plaintiff targeting of Audit Committee defendants. Targeting of other defendant types such as the CEO or Board Chairman remained relatively constant, though CFOs were named about 10% less often in the 2009-10 period.
Restatements rose following SOX and then declined. Class actions related to restatements followed this trend. Audit committee members tend to be targeted in cases involving restatements more than in other cases, including cases involving alleged financial misstatements where there is no restatement. Consequently, Audit Committee members’ involvement in securities class actions generally followed the same pattern. In fact, Audit Committee members were named disproportionately more often in restatement-related cases following SOX, so the rise and decline in cases naming them was even more pronounced than the rise and decline of restatement-related cases.
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