Disgruntled investors are filing lawsuits at an accelerating pace this year, with many of the latest cases targeting Wall Street brokerage firms for their handling of initial public stock offerings in the late 1990s, according to statistics released last month.
Through Aug. 17, 263 shareholder lawsuits have been filed this year, up from 201 all of last year and 207 in 1999, according to consulting firm PricewaterhouseCoopers. The record in the late 1990s was 260 suits in 1998.
The data underscore the dramatic surge in litigation that has occurred this year after the stock market plunge. “There’s nothing like losing money to inspire people to sue,” said Alan Bromberg, a securities law expert at Southern Methodist University in Dallas.
Lawsuits against individual firms, as well as arbitration cases against stockbrokers and securities firms, frequently spike whenever the market falls sharply.
Individual investors are on pace to lodge 6,716 arbitration cases against brokerages this year, topping the 6,058 of 1995, the year after the market slipped, according to the National Association of Securities Dealers.
But investors this year also are targeting trends and issues that gained considerable attention during the market boom of the late 1990s.
Of this year’s lawsuits, 143 are aimed at Wall Street brokerage firms for alleged infractions in the IPO market.
Several high-profile lawsuits have been filed recently against individual stock analysts, alleging that their advice was tainted by financial conflicts of interest.
James Spellman, spokesman for the Securities Industry Association, Wall Street’s main trade group, defended the investment companies.
“When the Internet bubble burst, it caused a lot of people to look for a scapegoat,” he said. “But investors have a responsibility to understand what they’re investing in and what the risks might be.”