Claims are growing against directors & officers (D&Os) emanating from ‘bad news’ events not necessarily related to financial results. Scenarios include product problems, man-made disasters, environmental disasters, corruption and cyber-attacks.
These types of “event-driven” cases often result in significant securities or derivative claims from shareholders after the bad news causes a fall in share price or a regulatory investigation. Of the top 100 US securities fraud settlements ever, 59% are event-driven. There has also been a spike in claims resulting from the #metoo movement, where it is alleged D&Os allowed a toxic culture to take hold and endure within companies. The other prevalent types of events are cyber incidents, securities class actions, derivative actions and regulatory investigations and fines, including from the EU’s General Data Protection Regulation (GDPR).
A risk map in the report wassesses the risk of a company being subject to a securities group action in a particular jurisdiction, taking into account the availability and prevalence of third party litigation funding, which is regarded as a strong factor in increased group action activity around the globe. While countries such as the US, Canada and Australia see the highest activity and most developed securities class action mechanisms, overall, such mechanisms are developing and strengthening around the world with the Netherlands, Germany, England and Wales showing notable development and increased activity in recent years.
Litigation funding reduces many of the entrance cost barriers for individuals wanting to seek compensation, although there is much debate around the remuneration model of this business. Recently, many of the largest litigation funders have set up in Europe. Although the US accounts for roughly 40% of the market, followed by Australia and the UK, other areas are opening up, such as recent authorizations for litigation funding for arbitration cases in Singapore and Hong Kong. India and parts of the Middle East are predicted to be future hotspots.
