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
  • ILR Briefly COVID-19 Series: Federal Liability Problems and Solutions

    ILR Briefly COVID-19 Series: Federal Liability Problems and Solutions

    May 07, 2020

    As the public health and economic consequences of COVID-19 continue to mount, plaintiffs' lawyers are looking for ways to expand upon their legal theories and bring opportunistic litigation. This edition of ILR Briefly explores four projected hot spots of COVID-19 litigation: exposure liability, product liability, medical malpractice, and securities litigation. The paper goes on to recommend targeted federal legislative and administrative solutions to combat abusive lawsuits in these areas and protect the economic recovery. Read More

  • ILR Briefly COVID-19 Series: Liability Overview

    ILR Briefly COVID-19 Series: Liability Overview

    April 23, 2020

    As Americans and businesses of all sizes are working together to get through the COVID-19 health crisis, plaintiffs' lawyers have already begun filing COVID-19-related lawsuits. Limiting litigation abuse is essential to making available the tools and resources needed to combat the virus, and ultimately to spurring economic recovery once the immediate health crisis has been resolved. This edition of ILR Briefly explores the current and anticipated types of litigation coming out of the COVID-19 pandemic. Read More

All Results for Securities Litigation Reform

  1. Another 'Absurd' Suit Thrown Out

    September 10, 2013 | News and Blog

    Two weeks after a judge dismissed a securities suit that "bordered on the absurd," another judge has dismissed a similar suit filed by the same law firm against a different defendant... Read More

  2. Did DOJ File a Retaliatory Suit Against S&P?

    September 09, 2013 | News and Blog

    In February, the Department of Justice filed a lawsuit accusing Standard & Poor's of issuing misleading securities ratings before the financial crisis in 2008. But in a recent court filing, S&P says the suit is in retaliation for downgrading the country's credit rating in 2011.... Read More

  3. Frequent Filers: Repeat Plaintiffs in Shareholder Litigation

    September 03, 2013 | Research

    In recent years, shareholder litigation against public corporations has grown into a substantial financial enterprise controlled by relatively few shareholders and the law firms that represent them. With increasing frequency, these shareholders are state or municipal pension funds. Their lawyers are private law firms that are hired by the state (or another government unit) to pursue the case on a contingency fee basis, meaning the firm is paid a percentage of the judgment or settlement if its client, the state, is successful.... Read More

  4. Another Threat to Average Investors: Securities Lawsuits

    July 31, 2008 | Press Release

    During these tough economic times, the roughly 50% of all Americans who have their retirement and other investments tied up in the stock markets have a lot to worry about. Inflation. The mortgage meltdown. Rising fuel costs. However, obscured by these recent crises is a proven threat that has destroyed billions of dollars of average shareholders' wealth, year after year. The menace: securities class action lawsuits. ... Read More

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

    July 24, 2008 | Research

    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.... Read More

  6. Securities Lawsuit System in Need of Repair, U.S. Chamber Says

    July 23, 2008 | Press Release

    NEW YORK, N.Y.-Private securities class action lawsuits present a serious threat to the health of U.S. businesses, the prosperity of American families and the strength of our nation's global competitiveness, according to a new analysis released today by the U.S. Chamber Institute for Legal Reform (ILR).... Read More

  7. Chamber: FSR Study a Critical Voice in Calling for Needed Financial Industry Reforms

    November 06, 2007 | Press Release

    WASHINGTON, D.C. - U.S. Chamber Institute for Legal Reform President Lisa A. Rickard, and the U.S. Chamber Center for Capital Markets Competitiveness Executive Director Michael Ryan, released the following joint statement on the Financial Services Roundtable blue ribbon commission report (pdf) on enhancing competitiveness of the U.S. capital markets system... Read More

  8. Chamber Urges Congress, SEC to Address Competitiveness of U.S. Capital Markets and Securities Lawsuit Abuse

    June 25, 2007 | Press Release

    WASHINGTON, D.C.-The U.S. Chamber of Commerce today urged Congress and the SEC to address the challenges to the competitiveness of U.S. capital markets. The call came as the House Committee on Financial Services met to discuss the role of the SEC in investor protection and market oversight.... Read More

  9. Stoneridge Could Further Damage U.S. Competitiveness

    June 10, 2007 | Press Release

    Washington, DC-U.S. Chamber Institute for Legal Reform President Lisa A. Rickard released the following statement on the deadline on amicus filings in support of the plaintiff's position in Stoneridge Investment Partners v. Scientific-Atlanta. The case, a securities class action pending before the U.S. Supreme Court, is widely viewed as precedent-setting that will determine whether or not a company can be sued simply because it did business with an alleged violator. ... Read More