Federal securities class actions decreased in the first half of2012 compared with last year largely because of a decline inChinese reverse mergers and the lowest number of mergers andacquisitions since the third quarter of 2009, according to astudy.

According to the Stanford Law School Securities Class ActionClearinghouse and Cornerstone Research, 88 federal securitiesclass-action, or group, lawsuits were filed in the first six monthsof this year, a reduction of 6 percent from both the first half andsecond half of 2011.

Stanford Law School and Cornerstone reported five securitiesclass actions filed over Chinese reverse-mergers in the first halfof the year, a 79 percent decline compared with the same periodlast year, and seven such filings related to mergers andacquisitions in the past six months, a 67 percent decline from thesame period in 2011.

The decline in filings stemming from Chinese reverse mergersisn't a surprise because “that sector of the market has alreadybeen badly hit by concerns over the integrity of Chineseprivate-company financial statements and these deals have beendisappearing from the market,” Joseph Grundfest, a professor atStanford Law School, said in an e-mailed statement.

Fewer lawsuits over mergers and acquisitions are directlyrelated to a low deal count, Grundfest said. “You can't bringmerger litigation over a merger that hasn't happened,” he said inthe statement.

While class actions over Chinese reverse mergers dropped,filings against foreign issuers as a percentage of all lawsuitswere greater than every year since 1997, with the exception of lastyear, according to the study.

The greatest number of such filings reported since Stanford LawSchool and Cornerstone started tracking the data in 1997 was 127 inthe first half of 1998. The lowest number, 55, was reported in thesecond half of 2006.

Future filings may result from allegations of Libor rigging,according to Grundfest. Regulators in the U.S. and Europe areprobing more than a dozen banks worldwide over allegations theymanipulated Libor, a benchmark for financial products valued at$360 trillion worldwide. Investigators are examining whethertraders colluded to rig the rate for profit and whether banksunderstated their borrowing costs to appear healthier than theywere.

“The magnitude of the potential exposures and the complexity ofthe underlying damages claims will likely generate large amounts oflitigation activity in many geographies,” Grundfest said in thestatement.

“Much of that litigation activity will occur away from the U.S.class-action securities fraud sector, but more lawsuits arevirtually assured,” Grundfest said.

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