Akin Gump litigation partners Jeffery Dailey and Neal Marder have written the article "The rise in event-driven securities litigation — Why it matters to directors and officers," published by Willis Towers Watson. The article looks at what might be behind an uptick in securities class actions, and why it matters.
Dailey and Marder begin with a look at the changing landscape of securities litigation, pointing to "the shift in the nature of securities class actions from traditional accounting-based allegations ... to those filed in response to adverse company events, such as a data security breach, sexual harassment allegations, an explosion, allegations that a drug or product has side effects or caused injury, or a regulatory investigation or enforcement action." As they point out, "just because something bad happened does not mean that the company or its directors and officers committed fraud."
Unfortunately, write the authors, "many of the event-driven suits are based on the tenuous theory that the occurrence or the event upon which the case is based was the materialization of an under-disclosed or downplayed risk." With that in mind, it is important to know how to reduce the risks of a lawsuit.
The article proceeds to discuss several examples of event-driven securities litigation. It then offers some advice for directors and officers on minimizing and mitigating the risk.
In the end, Dailey and Marder note that, while "there is no silver bullet that directors and officers of public companies can employ to ward off all securities litigation," following certain steps "will make it harder for plaintiffs to target companies and will strengthen their defenses."
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