Heightened Pleading Requirements
In adopting the PSLRA in 1995, Congress was persuaded that the arguments of the defense bar had merit. The legislative history reveals that Congress passed the PSLRA to curb the "abusive practices committed in private securities litigation" including "the routine filing of lawsuits against issuers of securities and others whenever there is a significant change in an issuer's stock price, without regard to any underlying culpability of the issuer, and with only faint hope that the discovery process might lead eventually to some plausible cause of action."
To reduce the number of purportedly frivolous Rule 10b-5 lawsuits that survive motions to dismiss, the PSLRA raised the pleading standards (the specificity and strength of the factual allegations that must be alleged in the plaintiff's complaint) in three specific ways. These changes are among the most significant aspects of the PSLRA.
Read more about this topic: Private Securities Litigation Reform Act
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—Cyril Connolly (19031974)
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