Securities Litigation

Securities Class Action Litigation: The problem, its impact, and the path to reform

Private securities class actions present a serious threat to the health of the U.S. economy. The costs of securities litigation are enormous, but the benefits are miniscule. The culture of abusive class actions, driven by a multibillion dollar plaintiffs’ lawyer industry, is eroding the competitiveness of U.S. capital markets at a time when they face perhaps their greatest threat from foreign competition. The system is broken, and Congress must enact the reforms needed to fix it.

Stoneridge Inv. v. Scientific-Atlanta, 128 S.Ct. 761

Securities Class Action Litigation Reform (White Paper)

America’s securities class action system does not work as intended and, indeed, some would say that it is broken. Overall, the system harms U.S. competitiveness in the global business and financial markets due to the huge costs for market participants and has a negative economic effect on companies and the U.S. economy. Because plaintiffs’ lawyers often use securities class action litigation to extort settlements from companies, it becomes a means of cost shifting which ultimately harms shareholders. Also, it does not serve its intended functions – to provide compensation to injured parties and to deter wrongdoing. Further, it requires procedural fixes in order to make the litigation proceed in a fair and expeditious manner. Several bipartisan reports have highlighted the problems with and abuses of the securities class action system. This paper summarizes some of these issues and proposes a broad array of solutions for consideration.

Letter to SEC Chairman Cox