Financial Restatements

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The number of securities class action lawsuit filings involving accounting allegations increased in 2023 compared to 2022, but the 2023 accounting-related filings remained below the long-term annual average number of such filings, according to the latest annual report from Cornerstone Research. The number of accounting-related settlements decreased during 2023, as did the median settlement value, though the aggregate and average value of accounting related settlements increased. The Cornerstone Research Report, which is entitled “Accounting Class Action Filings and Settlements: 2023 Review and Analysis,” can be found here. Cornerstone Research’s April 3, 2024, press release about the report can be found here.Continue Reading Cornerstone Research: Accounting-Related Securities Suit Filings Increased in 2023

On April 12, 2021, when John Coates, the acting director of the SEC Division of Corporate Finance, and Paul Munter, the SEC’s acting chief accountant, issued a statement noting their concerns about the way that SPACs were accounting for warrants issued in connection with SPAC IPOs, they also noted that some entities may need to reclassify the warrants from equity to liabilities, and that the change in accounting treatment might require some entities to restate prior financial statements. As it has turned out, many SPACs have in fact reclassified their warrants and many have in fact restated their financials, as discussed below. In at least one case, discussed in earlier post on this site (here), a SPAC-acquired company that restated its financial based on the warrant accounting issue has been hit with a securities class action lawsuit – which raises the question whether other restatements by other SPACs and de-SPACs will trigger further securities class action litigation.

That is the question asked in a June 22, 2021 Law360 article by Elaine Harwood, Steven McBridge and Laura Simmons of Cornerstone Research entitled “Will SPAC Restatement Wave Trigger Shareholder Litigation?” (here). As discussed below, the authors’ article addresses several interesting and important questions about the warrant accounting issue and the possibility for further litigation.
Continue Reading Will SPAC Warrant Accounting Restatements Result in Further Securities Class Action Litigation?

Financial restatements among U.S public companies hit their lowest level in years in 2017, according to the latest annual report from Audit Analytics. The total number of restatements declined in 2017 to a 17-year low and the number of reissuance restatements (those requiring withdrawal and reissuance of previously released financial reports) declined for the eleventh consecutive year. The number of companies restating their financials is at its lowest level since at least 2002. The findings are summarized in a June 7, 2018 Audit Analytics blog post (here). The full report can be found here (subscription or purchase required).
Continue Reading Number of Restatements Continues to Decline

financial statementsFinancial restatements among U.S public companies hit their lowest level in years in 2016, according to the updated annual report of Audit Analytics. As a result of heightened standards as well as the decreased numbers of listed companies, the share U.S. companies restating their prior financial statements hit their lowest level since 2010 and the number of companies restating their financials is at its lowest level since at least 2002. The findings are summarized in a June 12, 2017 Audit Analytics blog post (here). The full report can be found here (subscription or purchase required).
Continue Reading Financial Restatements Continue to Decline for U.S. Reporting Companies

bruce ericson
Bruce Ericson

Among the many issues arising under the Sarbanes-Oxley Act are questions surrounding disgorgement under Section 304, particularly questions concerning what actions and whose actions might trigger disgorgement. In the following guest post, Bruce Ericson of the Pillsbury Winthrop Shaw Pittman law firm takes a look at the Ninth Circuit’s August 31, 2016 decision in U.S. Securities & Exchange Commission v. Jensen in which the appellate court held that the SEC can seek disgorgement from a company’s CEO or CFO even if the triggering restatement did not result from those corporate officers’ misconduct. I would like to thank Bruce for his willingness to publish his article as a guest post on this site. I welcome guest post submissions from responsible authors on topics of interest to this blog’s readers. Please contact me directly if you would like to submit a guest post. Here is Bruce’s guest post.
Continue Reading Guest Post: Ninth Circuit Clarifies What Might Trigger SOX 304 Disgorgement