SEC renewed its focus on financial-reporting and disclosure issues in 2014
The number of securities class-action lawsuits alleging accounting fraud jumped 47% in 2014, even as the overall number of securities class actions was little changed, according to a new report from Cornerstone Research issued Tuesday.
The increase stems partly from a similar jump in accounting-fraud enforcement cases brought by the Securities and Exchange Commission as it renewed its focus on financial-reporting and disclosure issues in 2014 after several years of focusing on other matters.
The numbers show 69 new securities cases with accounting allegations filed in 2014, up from 47 in 2013. There were 170 total new securities class action filings in 2014, up only slightly from 166 the previous year.
The jump in accounting lawsuits mirrors a 46% increase in SEC accounting-fraud enforcement actions in the fiscal year that ended last Sept. 30, the first year-over-year increase in SEC accounting cases since 2007. The agency has said publicly over the past year or two that it’s paying more attention to accounting fraud, after several years of concentrating on misconduct related to the financial crisis.
Accounting lawsuit filings involving restatements of financial statements hit a seven–year high, at 42% of accounting cases. Cornerstone noted that the severity of stock-price drops surrounding restatements also increased in 2014, potentially encouraging investors to file such cases.
Of the securities class-action settlements reached during the year, 70% were in cases involving accounting allegations, according to the report, the highest level since 2010.