The Private Securities Litigation Reform Act of 1995, Pub. L. 104-67, 109 Stat. 737 (codified as amended in scattered sections of 15 U.S.C.) ("PSLRA") implemented several substantive changes in the United States, affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation, and awards fees and expenses.
The PSLRA was designed to limit frivolous securities lawsuits. Prior to the PSLRA, plaintiffs could proceed with minimal evidence of fraud and then use pretrial discovery to seek further proof. This set a very low barrier to initiate litigation, which encouraged the filing of weak or entirely frivolous suits. Defending against these suits could prove extremely costly, even when the charges were unfounded, so defendants often found it cheaper to settle than fight and win. Under the PSLRA, however, plaintiffs need more proof of fraud before they can initiate a suit. This makes it very difficult to file a frivolous suit, but it also makes it much harder to file legitimate ones, as plaintiffs are forced to present evidence of fraud before any pretrial discovery has taken place.
The PSLRA imposes new rules on securities class action lawsuits. It allows judges to decide the most adequate plaintiff in class actions. It mandates full disclosure to investors of proposed settlements, including the amount of attorneys' fees. It bars bonus payments to favored plaintiffs and permits judges to scrutinize lawyer conflicts of interest.
Read more about Private Securities Litigation Reform Act: Background: Overview of Securities Fraud Actions Under Section 10(b) and Rule 10b-5, Putting The PSLRA in Context: The Procedural Course of A Modern Securities Fraud Action, Heightened Pleading Requirements, Stay of Discovery, Legislative History
Famous quotes containing the words private, reform and/or act:
“That’s interesting. Sort of a private preserve for teenagers, huh? I suppose as adults we’re lucky to find a parking space.”
—Kenneth Langtry. Herbert L. Strock. Prof. Frankenstein (Whit Bissell)
“It is doubtless wise, when a reform is introduced, to try to persuade the British public that it is not a reform at all; but appearances must be kept up to some extent at least.”
—George Bernard Shaw (1856–1950)
“In the relations of a weak Government and a rebellious people there comes a time when every act of the authorities exasperates the masses, and every refusal to act excites their contempt.”
—John Reed (1887–1920)