Feeds

Is it SOX or socks behind drop in class-action lawsuits?

Hard to tell yet

Top 5 reasons to deploy VMware with Tegile

Call it post bull-market blues or the responsibilities demanded by Sarbanes Oxley (SOX), but the number of class-action lawsuits against public companies is dropping.

Lawsuits from disgruntled investors in 2005 stood at 176 - a fall of 17 per cent compared to the previous year, according to the Stanford Law School and Cornerstone Research. Last year's number is 10 per cent below the average number of filings between 1996 and 2004.

The fall comes four years after the US introduced SOX that demanded management follow government-mandated guidelines and procedures in finance and corporate governance to ensure they stayed on the right side of the law.

SOX helped the IT software and consulting industries overcome customers' spending inertia, as organizations installed systems designed to prove their compliance to external auditors. AMR Research says public companies spent $6.1bn on SOX compliance during 2005, up from $5.5bn in 2004, with $6bn expected to be spent during 2006.

SOX's introduction followed the accounting scandal of MCI WoldCom that sent former chief executive Bernie Ebbers to prison, and the collapse of energy giant Enron, whose founder Kenneth Lay and former CEO, Jeffrey Skilling, are due to go to trial in the US this month.

Not all are convinced SOX is entirely responsible for the drop in lawsuits, however. Stanford Law school professor Joseph Grundfest said it could take another two years before any firm conclusions can be drawn about whether the numbers are part of a downward trend.

One thing, though, is clear: the fall has coincided with the rise of the bear market and drop in exposure to risk for investors in areas like tech. Investor losses, measured by stock declines recorded on the day or day after a fraud is announced, fell 33 per cent year-over-year to $99bn in 2005, down from a high of $236bn in 2000.®

Secure remote control for conventional and virtual desktops

More from The Register

next story
Ex-US Navy fighter pilot MIT prof: Drones beat humans - I should know
'Missy' Cummings on UAVs, smartcars and dying from boredom
Facebook, Apple: LADIES! Why not FREEZE your EGGS? It's on the company!
No biological clockwatching when you work in Silicon Valley
The 'fun-nification' of computer education – good idea?
Compulsory code schools, luvvies love it, but what about Maths and Physics?
Doctor Who's Flatline: Cool monsters, yes, but utterly limp subplots
We know what the Doctor does, stop going on about it already
'Cowardly, venomous trolls' threatened with TWO-YEAR sentences for menacing posts
UK government: 'Taking a stand against a baying cyber-mob'
Happiness economics is bollocks. Oh, UK.gov just adopted it? Er ...
Opportunity doesn't knock; it costs us instead
Sysadmin with EBOLA? Gartner's issued advice to debug your biz
Start hoarding cleaning supplies, analyst firm says, and assume your team will scatter
Don't bother telling people if you lose their data, say Euro bods
You read that right – with the proviso that it's encrypted
prev story

Whitepapers

Forging a new future with identity relationship management
Learn about ForgeRock's next generation IRM platform and how it is designed to empower CEOS's and enterprises to engage with consumers.
Cloud and hybrid-cloud data protection for VMware
Learn how quick and easy it is to configure backups and perform restores for VMware environments.
Three 1TB solid state scorchers up for grabs
Big SSDs can be expensive but think big and think free because you could be the lucky winner of one of three 1TB Samsung SSD 840 EVO drives that we’re giving away worth over £300 apiece.
Reg Reader Research: SaaS based Email and Office Productivity Tools
Read this Reg reader report which provides advice and guidance for SMBs towards the use of SaaS based email and Office productivity tools.
Security for virtualized datacentres
Legacy security solutions are inefficient due to the architectural differences between physical and virtual environments.