The number of class-action securities filings dropped in the first six months of 2012 compared with last year, largely due to a substantial decline in Chinese reverse mergers, and mergers and acquisitions filings.

The semiannual report prepared by the Stanford Law School Securities Class Action Clearinghouse in cooperation with Cornerstone Research show that there were 88 filings in the first six months of 2012, down 6 percent from both the first and second half of 2011. Out of the 88 filings, 10 involved companies in the S&P 500, slightly more than at mid-year 2011 when eight S&P 500 companies had been named in new securities class actions.

The report cited five Chinese reverse merger (CRM) filings in the past six months, a 79 percent decline compared with the first half of 2011. In addition, there were seven M&A-related filings over the same time period, down 67 percent compared with the second half of 2011.

In 2011, Chinese firms were named in 40 of the 68 filings against foreign issuers, but in the first half of 2012, they accounted for only 12 of the 23 filings against foreign issuers. In the first half of 2012, there were seven filings against Chinese companies that were not related to CRMs, compared with eight such filings in all of 2011.

“The decline in litigation activity related to Chinese reverse mergers comes as little surprise, as that sector of the market has already been badly hit by concerns over the integrity of Chinese private-company financial statements, and these deals have been disappearing from the market,” said Joseph Grundfest, Director of the Stanford Law School Securities Class Action Clearinghouse.

Fewer lawsuits over mergers and acquisitions are related to a decline in federally filed M&A litigation. “You can't bring merger litigation over a merger that hasn't happened,” Grundfest said.

Despite the drop in CRM-related class-actions, filings against foreign issuers as a percentage of all filings were greater than every year since 1997, with the exception of 2011, according to the study.

Grundfest surmised that future filings may result, courtesy of the LIBOR trading scandal. Criminal prosecutors in the U.S. and other countries are investigating several major banks worldwide over allegations that they rigged the London Interbank Offered Rate (LIBOR)—a benchmark used to set interest rates for trillions of dollars of consumer loans—in order to boost profits.

“Looking over the horizon, the LIBOR-litigation industry is clearly a sector to watch for years to come,” said Grundfest. “The magnitude of the potential exposures and the complexity of the underlying damages claims will likely generate large amounts of litigation activity in many geographies.”

In the first half of 2012, the market capitalization declines associated with announcements at the end of the class period were consistent with 2011 results and remained below historical levels. The total Disclosure Dollar Loss (DDL) of $54 billion in the first six months of 2012 represented a slight decrease from the second half of 2011 and was lower than the 1997 to 2011 historical average of $64 billion. The two “mega DDL” filings in the first half of 2012 were associated with combined end-of-class market capitalization losses exceeding $26 billion.

The total Maximum Dollar Loss (MDL) of $249 billion in the first half of 2012 fell between the totals from the first and last six months of 2011. The total in the first half of 2012 was 25 percent below $334 billion, the average MDL observed in the six-month periods between 1997 and 2011.