News & Events

News & Events

3.24.2015

Cybersecurity Securities Class Actions: Wave or Trickle?

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Lane Powell Shareholder Doug Greene authored a March 20 Law360 article titled “Cybersecurity Securities Class Actions: Wave or Trickle?” In the article, Greene discussed the possibility of cybersecurity becoming a significant directors and officers liability issue, potentially leading to derivative litigation, securities class actions, and U.S. Securities and Exchange Commission enforcement matters. He further discussed what he believes will trigger such securities class actions when, to date, even the largest breaches have not caused any significant and sustained stock price drops.

Unlike shareholder derivative actions, which do not require a significant stock drop, securities class actions require misrepresentations to cause loss to stock purchasers — loss that materializes upon the disclosure of bad news that causes the stock to drop. Thus, the advent of cybersecurity securities class actions will not occur unless stock prices begin to drop.

So why do I think stock prices will drop? It’s easiest to start to answer that question by thinking about why stock prices generally haven’t dropped to date.

Greene’s article first appeared on Lane Powell’s D&O Discourse blog, and was also recognized in Securities Regulation Daily’s “Blog Tracker” as the week’s most insightful, intriguing and entertaining blog post from securities, commodities and corporate governance communities.