Securities Litigation Reform

Private securities class actions are lawsuits filed on behalf of shareholders against publicly traded companies alleged to have defrauded their investors. Supporters of these cases claim they are necessary to compensate shareholders and stop corporate transgressions. However, plaintiffs’ lawyers are the real beneficiaries of securities class actions, not investors. Read More...

There is enormous pressure on companies to settle these cases because of the cost of going to trial, the burden they inflict on management, and the risk of a runaway verdict. This typically results in settlements even in cases where the merit of the claim is questionable. The individuals responsible for wrongdoing rarely make a significant contribution, and those whom the securities class action system is supposed to protect—small, individual retail investors—are the ones who, in fact, benefit the least.

These cases threaten the health of the U.S. economy by imposing huge costs on American businesses, investors, and employees, while hurting the global competiveness of the U.S. securities markets. Companies actively question whether they want to access the U.S. securities markets and expose themselves to the problematic liability our current system imposes. The number of publicly registered American companies is now roughly half of what it was approximately 20 years ago and the fact that nearly one-in-ten public companies will be hit with a securities class action this year, could certainly dissuade companies from going public.

To curb securities litigation abuses, and improve the health of the U.S. economy, Congress, the courts and the Securities and Exchange Commission should consider commonsense reforms that would expose relationships between securities class action attorneys and plaintiffs, limit the lottery aspect of securities litigation and drive out meritless cases from the courts.

01/01/2019

Suggested Resources

Research
  • Containing the Contagion: Proposals to Reform the Broken Securities Class Action System

    Containing the Contagion: Proposals to Reform the Broken Securities Class Action System

    February 25, 2019

    Record-high numbers of securities class action filings are swamping the protections that Congress created in 1995. In fact, the likelihood that a public company will be sued has never been greater, and the bulk of these lawsuits show the classic signs of litigation abuse. However, solutions are at hand. This research proposes regulatory and legislative action to contain the securities litigation contagion. Read More

  • Risk and Reward: The Securities Fraud Class Action Lottery

    Risk and Reward: The Securities Fraud Class Action Lottery

    February 25, 2019

    Securities fraud class action lawyers are playing the "litigation lottery," filing often meritless cases against big companies on the off-chance of a big settlement. This research looks at all securities fraud class actions filed between 2005 and 2016 to reveal the true incentives that motivate plaintiffs' lawyers to roll the dice on these lawsuits, despite their high dismissal rate. Read More

All Results for Securities Litigation Reform

  1. Securities Class Action System In Need of Repair

    February 15, 2006 | Press Release

    WASHINGTON, D.C. - The securities class action litigation system is not working the way Congress intended it to work when it passed the Private Securities Litigation Reform Act (PSLRA) of 1995, according to a paper released today by the U.S. Chamber Institute for Legal Reform (ILR). "The PSLRA, which was designed to protect the average American investor, has been subverted by entrepreneurial plaintiffs' lawyers," said Thomas J. Donohue, President and CEO of the U.S. Chamber of Commerce. "The system needs to be repaired." ... Read More

  2. The Economic Realities of Securities Class Action Litigation

    October 26, 2005 | Research

    Unlike conventional fraud claims, which seek to disgorge wrongful gains from the perpetrator of the fraud, securities class action claims usually entail situations in which the supposed illicit gains are received by innocent investors, who sold securities at allegedly inflated prices, rather than by the company officials who allegedly committed the fraud.... Read More

  3. Chamber Report: Securities Class Action System Out of Kilter

    October 25, 2005 | Press Release

    WASHINGTON, D.C. - A U.S. Chamber Institute for Legal Reform (ILR) study of the securities class action litigation system shows that there is a substantial disconnect between what the system is supposed to do in terms of compensating investors and what it actually does. The report was released today as part of ILR's 6th Annual Legal Reform Summit. ... Read More

  4. Institute for Legal Reform Calls for SEC Review of Law Firm

    March 09, 2004 | Press Release

    WASHINGTON, D.C. - The United States Chamber of Commerce's Institute for Legal Reform asked the Securities and Exchange Commission to investigate certain short sellers and the Milberg Weiss law firm, following a recent California ruling that the firm's clients appeared to have participated in a fraud on shareholders. The court ruling removed these short sellers as lead plaintiffs in a class action. ... Read More