Securities class action filings have hit record highs in the United States. In 2016, the United States observed the highest number of securities class action filings since “the early 2000s dot-com crash.”[1] By July of this year, 246 new securities class actions claims were filed in U.S. federal courts.[2] This phenomenon comes as little surprise; these numbers reflect the recent upward trend in securities class action claims observed over the past number of years in the United States.
Canada, on the other hand, is not yet experiencing the same trend. In 2016, nine new securities class action claims were filed. With the exception of 2015, this figure is lower than the number of claims filed in any year annually since 2010.[3] These lower numbers of claims may be explained by differences in the litigation climate or incentive structures for plaintiff’s counsel. What is clear is that companies listed on the Toronto Stock Exchange (TSX) tend to face less litigation risk. From 2011 to 2016, 44 securities class actions were filed against companies listed on the TSX. This translates to a litigation risk of about 0.5% per year.[4] In comparison, companies listed on the major securities exchanges in the United States faced a litigation risk of approximately 3.1% per year over the same period.[5]
Canadian dual-listed companies, however, face increased risk. Six out of the nine class actions filed in Canada in 2016 involved companies that were also sued in parallel in the United States.[6] In fact, since 2006, approximately half of all securities class actions launched in the United States against Canadian companies have a corresponding claim in Canada.[7]
This data appears to suggest that Canadian companies listed both on Canadian and American securities exchanges are at a higher risk of securities class action lawsuits than companies listed solely on the TSX.
The author would like to thank Fahad Diwan, Student-At-Law, for his contribution to this article.
[1] Bradley A. Heys & Robert Patton, “Trends in Canadian Securities Class Actions: 2016 update” (2016) NERA Economic Consulting Report at 1.
[2] Stefan Boettrich & Svetlana Starykh, “Securities Class Actions: 2016 Full-Year Review and Mid-2017 Flash Update” (24 July 2017), Harvard Law School Forum on Corporate Governance and Financial Regulation, online: <https://corpgov.law.harvard.edu/2017/07/24/securities-class-actions-2016-full-year-review-and-mid-2017-flash-update/>.
[3] Supra note 1 at 2.
[4] Ibid.
[5] Ibid.
[6] Ibid at 6.
[7] Ibid at 7.