Currently and for many decades, publicly-held companies have not been able to avoid securities fraud suits against themselves and their executives and officers, other than behaving well. In the mid- to late 1990’s, “tort reform”-style legislation, principally the Private Securities Litigation Reform Act (PSLRA) tightened up the rules for bringing such actions successfully, leading to a much higher rate of early dismissals of weak claims. (As a defense lawyer, I helped clients achieve dismissal of flimsy or baseless securities fraud claims many times.)
However, not all claims are frivolous. Private securities class actions have recovered literally billions of dollars in losses for investors over the past several decades. It is common knowledge in the industry that the responsible government agency, the Securities and Exchange Commission (SEC) lacks the resources to pursue most credible claims of stock manipulation and other forms of securities fraud. Pensioners are often the victims when their retirement portfolios are damaged by such fraud.
What if the protective shield of potential private securities class actions were removed, with nothing to replace it? Not a modest, or even strong, reform (like the PSLRA), but a wholesale abandonment of investor protections would result. Regrettably, this is what Trump Administration appointees to the SEC are threatening to do. For an OpEd piece exploring this development, see here And call or write your Senators and Congressperson! Drew.