Hallmark Financial Services, Inc.

Period: 03/05/2019 to 03/17/2020
Lead Plaintiff Deadline: 07/06/2020

SUMMARY OF CASE:

A securities class action has been filed against Hallmark Financial Services, Inc. (HALL) on behalf of persons and entities that purchased or otherwise acquired Hallmark Financial  securities between March 5, 2019 through March 17, 2020.  This case has been filed in the USDC – N.D.TX.

On March 2, 2020, Hallmark Financial announced that it had decided to exit from its Binding Primary Commercial Auto business and reported a $63.8 million loss development for prior underwriting years.  On this news, the Company’s share price fell $2.10, or more than 14%, to close at $12.23 per share on March 3, 2020, on unusually heavy trading volume.

On March 11, 2020, Hallmark Financial disclosed that it had dismissed its independent auditor, BDO USA, LLP (“BDO”), due to a disagreement regarding estimates for reserves for unpaid losses, among other things.  On this news, the Company’s share price fell $2.39, or over 29%, to close at $5.71 per share on March 12, 2020, on unusually heavy trading volume.

On March 17, 2020, Hallmark Financial filed with the SEC a letter from BDO in which BDO stated “BDO expanded significantly the scope of its audit on January 31, 2020, with respect to which a substantial portion of the requests had not been received and/or tested prior to our termination.”  On this news, the Company’s share price fell $0.08, or 2.5%, to close at $3.12 per share on March 18, 2020.

The complaint alleges that throughout the Class Period, Defendants made materially false and/or misleading statements, as well as failed to disclose material adverse facts about the Company’s business, operations, and prospects. Specifically, Defendants failed to disclose to investors: (1) that the Company lacked effective internal controls over accounting and financial reporting related to reserves for unpaid losses; (2) that the Company improperly accounted for reserve for unpaid losses and loss adjustment expenses related to its Binding Primary Commercial Auto business; (3) that, as a result, Hallmark Financial would be forced to report a $63.8 million loss development for prior underwriting years; (4) that, as a result, Hallmark Financial would exit from its Binding Primary Commercial Auto business; and (5) that, as a result of the foregoing, Defendants’ positive statements about the Company’s business, operations, and prospects were materially misleading and/or lacked a reasonable basis.