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Lockton report points to sources of future litigation, advises companies on how to protect themselves
KANSAS CITY, Mo., May 6, 2014 /PRNewswire/ -- In their recent white paper, The Next Big Thing: Predicting the Changing Securities Litigation Landscape, Lockton's Mark Weintraub and Rodger Laurite assess the current state of securities litigation, identify potential sources of future lawsuits, and advise insureds on how to prepare.
As the number of public companies has decreased during the past 15 years and as novel litigation trends wane, pressure on the securities plaintiff's bar is growing. Market dynamics, increased competition, and an impending Supreme Court ruling have law firms desperately searching for the next big securities law trend. As such, companies need to know how to safeguard themselves from potential litigation.
While there is no way to see the future, the report encourages companies to:
This summer, the Supreme Court is expected to issue a ruling that will impact the future of securities litigation. In Halliburton Co. v. Erica P. John Fund, Inc., the court will revisit the "fraud on the market" presumption that markets are efficient and investors rely on the company to disclose material facts. This presumption assumes all investors involved in a lawsuit relied on specific information and does not require proof for each individual. Whether upheld or overturned, the outcome will shape the future of securities litigation.
As data increasingly becomes a company's most valuable asset, Weintraub and Laurite note opportunities surrounding cyber risk. They point to the infamous Target breach as an example, as shareholders have filed two suits against the company's directors and officers, claiming breach of fiduciary duty and waste of corporate assets.
"The lawsuit dynamics surrounding the Target cyber breach can easily develop into a new litigation trend as the foregoing pattern can be replicated whenever a company suffers a significant cyber event," said Weintraub. The report encourages companies to consistently review their policies and procedures surrounding data management and storage and follow the SEC guidelines for cyber-related disclosures.
While most D&O policies cover claims against individuals, they only cover an entity for limited securities-related claims. To be fully protected, a company should ensure their policy includes a broad definition of "securities claim" and does not limit coverage for follow-on civil litigation.
More than 4,950 professionals at Lockton provide 35,000 clients around the world with risk management, insurance, and employee benefits consulting services that improve their businesses. From its founding in 1966 in Kansas City, Missouri, Lockton has attracted entrepreneurial professionals who have driven its growth to become the largest privately held insurance broker in the world and 9th largest overall. Independent researcher Greenwich Associates has awarded Lockton its Service Excellence Award for risk management for large companies. For five consecutive years, Business Insurance has recognized Lockton as a "Best Place to Work in Insurance." To see the latest insights from Lockton's experts, check Lockton Market Update.
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