Securities Class Action Lawsuits in Biotech Hit Record High
In 2024, securities class action lawsuits against biotech and medtech firms rose by 4.7% compared to 2023, reaching their highest level since 2020. Of the 222 cases filed in federal court last year, 21.1% targeted companies in these two sectors.
Common causes are financial misconduct, misleading financial disclosures, misrepresentation of the prospect of clinical trials, and patent disputes. The trend is driven by increased regulation, changing legal standards, a growing litigation culture, and market dynamics.
As quoted by Labiotech, Justin Kozak, life sciences practice lead at Founder Shield, stated that “Biotech stocks can be volatile, especially after clinical trial results. This volatility can trigger securities class action lawsuits from investors who believe they were misled.” He went on to explain that executives face liability and may have to pay penalties or face jail time, and that early-stage companies are particularly vulnerable.
Implications for brokers and their clients:
- Where applicable, policies including specialized clinical trial insurance can address the risks around trial outcomes and disclosures, providing an extra layer of security for biotech firms.
- Tailored transaction liability insurance can help protect against biotech-specific risks in M&As and other deals.
- Investigate whether policies require defense and settlement costs for SEC, FDA, and other regulatory inquiries.
Source: Labiotech. (February 17, 2025). Biotech Lawsuits: Securities Class Actions on the Rise.
Five Years in Prison for AI Abuse? Italy Passes Landmark Law
The Italian parliament recently approved a new AI law, becoming the first EU country to enact a law aligned with the EU’s AI Act. The law aims to encourage “human-centric, transparent and safe AI use” through the following provisions:
- Prison sentences ranging from one to five years for distributing harmful AI-generated content.
- Stricter penalties for using AI to commit other crimes.
- The requirement for children under 14 to get parental consent before accessing AI tools.
- The requirement for data mining to only be carried out on non-copyrighted materials.
Italian Prime Minister Giorgia Meloni described AI as “the greatest revolution of our time,” but emphasized the need for an ethical framework.
Implications for brokers and their clients:
- Robust tech E&O and media liability coverage is essential.
- The ban on mining copyrighted materials raises the risk of infringement claims, emphasizing the importance of IP liability insurance.
- Stricter penalties for AI misuse increase the need for policies covering cyber and regulatory liability that respond to investigations and fines.
Source: JD Supra. (September 23, 2025). AI News Roundup: Efforts to Regulate AI Across the Globe.
Are Regulators About to Rewrite the Rules of Gambling?
The Better Gambling Forum, held in New York alongside the UN General Assembly and Science Summit at the end of September, indicates global developments in how gambling-related harm is addressed. At its core is the launch of the Responsible Gambling Practice and Policy Pillars (RG3P), a framework built on public health principles.
The RG3P is intended to help governments and regulators harmonize their strategies by providing a common language and shared metrics, making effective practices more scalable while strengthening operator accountability.
Forum participants are working to identify scalable practices for both online and land-based gambling. The ultimate goal is to create a draft international standard that governments and regulators can adopt or adapt. For now, it remains an evolving process rather than a driver of immediate legal change.
Implications for brokers and their clients:
- Review coverage for exposures connected to cross-border enforcement actions.
- While legal changes may not be imminent, operators should anticipate that insurers and regulators may place greater emphasis on governance and transparency.
- As regulation changes, gambling providers may need to ensure their policies explicitly address new obligations for player protection and proactive harm mitigation.
Source: SiGMA World. (September 23, 2025). United Nations Responsible Gambling 2025.
Fraud Epidemic in UK Biotech: Fake Data, Bribes, and Billions at Risk
The Economic Crime and Corporate Transparency Act 2023 (ECCTA), which came into effect in the UK on September 1, 2025, introduced a new strict liability offence: failure to prevent fraud (FTPF).
Under this law, large organizations can be held liable if an associated person commits a fraud offence intending to benefit the organization. Its extra-territorial scope means liability can arise regardless of where the individual or organization is based.
There are many fraud risks affecting the life sciences sector:
- Data manipulation: Clinical trial results may be falsified to secure or speed up market entry. Studies suggest up to 20% of clinical trial data may involve fabrication, falsification, or selective reporting.
- Dishonest sales practices: Between 2004 and 2020, there were 1057 reports of pharmaceutical companies breaching the Association of the British Pharmaceutical Industry code.
- Financial misreporting: A 2021 study found that an average of 7.35% of pharmaceutical companies engaged in fraudulent financial reporting between 2015–2019.
- Research fraud: False or plagiarized work is a growing concern, with 34% of neuroscience papers and 24% of medical papers in 2020 suspected of falsification or plagiarism.
- Bribery and corruption: Bribes may be used to influence trial outcomes, regulatory approvals, or procurement decisions.
Companies can defend against FTPF charges by showing they had reasonable fraud prevention procedures in place.
Implications for brokers and their clients:
- Review existing D&O policies to ensure regulatory investigations and fraud-related claims are adequately covered.
- Insurers may tighten scrutiny on fraud prevention measures when underwriting life sciences risks, potentially affecting coverage terms or premiums.
- The cross-border scope of the FTPF could lead to multi-jurisdictional claims, making policy wording and territorial limits critical for effective protection.
Source: DLA Piper. (June 24, 2025). Unmasking Deception: Fraud Risks in the Life Sciences Sector.
South Africa Bets Big on Cannabis
South Africa is moving to position itself as a global leader in the hemp and cannabis industry, backed by the National Cannabis Master Plan and recent legislation. The government aims to expand cultivation, create rural jobs, and boost exports while maintaining public health safeguards.
Key developments include the Cannabis for Private Purposes Act (2024) and plans for a comprehensive Cannabis Bill by 2027. The Bill will contain the Hemp and Cannabis Commercialization Policy, due for Cabinet approval by April 2026. It’s also been proposed that the hemp THC threshold be raised from 0.2% to 2% to broaden industrial uses.
With its favorable climate, strong demand for medicinal products, and policy support, South Africa is transitioning from informal cultivation to regulated, large-scale production and export.
Implications for brokers and their clients:
- With multiple laws coming into force, companies may face overlapping requirements or delays in policy implementation. Comprehensive, specialized cannabis insurance helps provide adequate coverage amid the uncertainty.
- Scaling cultivation heightens risks around crop loss and supply chain disruption, making business interruption insurance increasingly critical.
- With expansion into international markets, firms face cross-border risks that require specialized inland marine and product liability cover.
Source: Citizen. (September 20, 2025). South Africa Positions Itself as a Global Leader in Hemp and Cannabis Industry.
