NERA Economic Consulting and Cornerstone Research both found that filings are on track to be down overall for the year, although their numbers and methodologies vary slightly.

According to NERA, from January to June, there were 101 filings of securities class actions. If that pace continues through the remainder of the year, 2010 will see 202 cases filed, a nearly 9 percent decline from the 221 filings in 2009. There were 248 filings in 2008.

The Cornerstone study, prepared in cooperation with Stanford Law School Securities Class Action Clearinghouse, counted a total of 71 federal securities class actions filed in the first half of the year, a 15.5 percent decline from the 84 filings in the first half of 2009.

Both reports attributed the decline to a drop in cases related to the global credit crisis. NERA, for example, counted 17 credit crisis cases filed in the first half of the year, compared to 57 for the whole of 2009.

The NERA study found that the median settlement for the first half of 2010 was considerably higher than in any prior year: $11.8 million, compared to $9 million for 2009. It was the first time the median settlement crossed the $10 million mark. One reason for the increase was a substantial jump in median investor losses, which correlate strongly with settlement size. Median investor losses for cases settled in the first half of the year were $436 million - the highest since 1996.

"Half of all settlements were for an amount higher than $11.8 million, a record," said Dr. Jordan Milev, NERA senior consultant and co-author of the report. "Whether this shift is temporary or permanent remains to be seen."

The average settlement size was $209 million, although that was significantly influenced by the $7.2 billion Enron settlement finalized in February. Excluding Enron, the average settlement was $24 million, down from the $42 million average in 2009 but within the same range as the overall $28.7 million average between 2003 and 2010.

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Last year, the median settlement for cases with public pensions as lead was $20 million, compared with just $5.1 million for non-public pension leads.

Significantly, the analysis controlled for the fact that public pension funds are more sophisticated and tend to participate in stronger cases.

"A statistical analysis of settlement amounts and participation of public pension plans as lead plaintiff shows that even when controlling for estimated 'plaintiff-style' damages (case size) and other factors that affect settlement amounts (such as the nature of the allegations), the presence of a public pension plan as lead plaintiff is still associated with a statistically significant increase in settlement size," the report said.

Overall, securities class action settlements totaled $3.8 billion last year, a 35 percent increase over 2008. A total of 103 settlements (averaging $37 million) were approved in 2009, compared to 97 (averaging $28 million) for the prior year.

According to AXA Rosenberg's website, this approach allows it "to make decisions for [its] clients that are objective and rational, seeking to achieve consistent, superior results." But on April 15, AXA Rosenberg informed its clients that it had not disclosed a coding error in the software that was first discovered nearly a year earlier—in June 2009—and had been fixed sometime last fall. That snag may have affected how certain risks were recognized for in its computer modeling.

AXA Rosenberg has commissioned an economic and financial consultant to analyze how the error may have impacted performance or losses. Once the results of that study—expected to be released to AXA Rosenberg's clients in July—are finalized, Berman DeValerio may be able to offer legal advice to its clients upon request regarding what, if any, legal claims may be warranted.

The company admitted that the coding error "was not reported in a complete and timely manner by senior investment officers as required by the firm's policies." In the weeks following the disclosure, several pension funds terminated AXA Rosenberg as their asset manager, including Los Angeles Fire and Police Pensions, the School Employees Retirement System of Ohio, the Florida State Board of Administration and the City of Fresno Retirement Systems.

Regardless of the investigation's outcome, the error—and the firm's lack of timely disclosure—has shaken investor trust.

But the presidential election of George W. Bush means Levitt's tenure is most likely nearing an end and with it, the SEC's vigorous campaign against fraud. The thought of a Bush appointee in Levitt's seat is troubling to anyone who believes that the US financial markets are the world's most successful because of their unrivaled reputation for fairness, liquidity, and transparency.

Over the years, Bush and other prominent Republicans have done everything within their power to curtail the rights of investors and other consumers hurt by corporate misdeeds.

As governor of Texas, for example, President-elect Bush led the fight to limit the amount of punitive damages juries there can award in civil cases. His stated purpose: to protect companies against greedy lawyers. The result: to make fraud more attractive by removing the threat of financial consequences. The effects of Bush's tort reform can already be felt. The Wall Street Journal recently wrote that while Texas has one of the largest shares of deaths and injuries related to Firestone tires, the state's laws restrict victims' ability to get compensation.

Republican lawmakers and the Washington business lobby have pledged to step up attacks on class actions, lawsuits that allow fraud victims to band together to seek damages against corporations. The same Republicans who discourage consumers from bringing civil suits against corporate wrongdoers also have worked hard to hamstring regulatory agencies like the SEC by slashing their budgets.

Whether dealing with fallout from faulty tires or inflated stocks, federal regulators cannot do the job alone. Private litigation has become an important adjunct for chronically overworked and understaffed agencies.

The SEC must carefully pick and choose its battles, deploying its limited resources on a small number of high-profile cases designed to send a message to would-be corporate wrongdoers. The government simply cannot afford to prosecute most suspected stock fraud.

And make no mistake: Stock fraud is a booming business in America. Soaring share prices, demanding investors, and a generation of corporate leaders whose fortunes are tied to stock options have led to a dramatic increase in accounting gimmickry at publicly traded companies.

Since 1997, the SEC says nearly 400 companies have restated financial results, approximately 1 percent of those making public filings. Accounting and financial fraud cases made up one-fifth of the agency's caseload in fiscal 2000.

That number is rising in part because the penalties for falling short of Wall Streets expectations can seem worse to company management than the potential threat of a fraud prosecution. If a company misses analyst projections, even by a few pennies, its stock price takes a beating.

Faced with a quarterly shortfall, some corporate managers choose to manipulate the numbers.

In addition to being wrong, succumbing to such temptations can backfire if the maneuver is discovered down the road. But even if the fraud goes undetected, each cooked book burns the credibility of the entire stock market.

Today, American markets enjoy the confidence of the world, Levitt said in 1998.

Since then, Levitt has done much to restore a shining faith in US markets. He beefed up the SEC's enforcement division. He enacted regulations ending selective disclosure of information that can move stock prices. He established rules to reduce conflicts of interest for the auditors charged with examining a company's books.

Perhaps most importantly, his staff issued guidelines that make it tougher to use what Bush might call fuzzy accounting to pad revenues.

With Republicans knocking on the White House door and the stock markets continuing their wild ride, Levitt's legacy should not be squandered.

Corporate America needs to step back from the quarterly numbers game and support stricter accounting standards and greater accountability for fraud, especially those related to revenue recognition. The public, meanwhile, must resist efforts to pass ill- conceived laws that discourage citizens from using private litigation to recover damages caused by fraud.

Glen DeValerio, SEC's Fight Against Fraud at Risk, The Boston Globe, Dec. 19, 2000, at C4