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Are securities fraud class actions dwindling?

While it remains to be seen how many class action securities fraud cases will be filed before the end of 2015, The rise in the stock market over the last year has had a profound effect on the number of such suits being filed in federal court. According to a Forbes.com article, there were fewer securities class action suits filed in 2014, and the potential money damages to be recovered dwindled to its lowest level since 1997.

This post will explore some of the observations behind this trend. 

Fraud commonly occurs in falling markets – While the market improved overall, the energy sector was pummeled as falling oil prices caused investors to lose money. Securities fraud lawsuits against oil companies and other energy conglomerates were based on more than $50 billion in losses, compared to only $13 billion in 2013.

Congress has reigned in class action suits – Reform laws have worked against class action plaintiffs lawyers, and court decisions following these reforms have led to more lawsuits being dismissed. In fact, 2011 saw more than half of securities fraud class action cases being dismissed. Also, settlements of these types of cases have dropped precipitously, with the median settlement being $6.5 million; the lowest in nearly 20 years.

Does this mean that people should think twice before joining a securities fraud class action? This remains to be seen. Nevertheless, securities fraud is still a big problem in the market place, and having a conversation with an experienced attorney can help you understand your rights. 

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