A new study by Stanford University and Cornerstone Research suggests that shareholder-protection laws, such as the Sarbanes-Oxley Act of 2202, have helped reduce the number of investor suits by requiring more diligent corporate governance. According to the study, the number of securities class actions fell 17% in 2005, to 176, which is 10% lower than the average number of such suits between 1996 and 2004. At the same time, investors losses dropped 33%, from $147 billion in 2004 to $99 billion.

New laws protecting shareholders, observers say, should share the credit with a couple of other factors contributing to the reduction: a less volatile stock market and the fact that the number of such suits have been dwindling since accounting-fraud suits were filed in 2001 and 2002 against the likes of Enron Crop. and WorldCom. Outside the realm of court, the study notes, there has been an increase in complaints about misrepresentations in financial reports and misleading forecasts.