Securities Fraud Happens
This editorial first appeared in the Nashville Tennessean on July 10, 1995. It is reprinted with permission.
Shakespeare wrote, "Let's kill all the lawyers." Congress is now saying, "Let's stop all the lawsuits."
The U.S. Senate made another move in that direction when it passed the Securities Litigation Reform Act. The Senate legislation, like its more aggressive House companion, is billed by supporters as a dam to stop the flood of frivolous lawsuits involving securities.
But the bill, which was opposed by the Securities and Exchange Commission, the American Bar Association, the Consumer Union, the Gray Panthers, the National League of Cities, the U.S. Conference of Mayors, the Fraternal Order of Police, the American Council of Education, and the North American Securities Administrators Association, just to name a few, would leave local governments and individual investors extremely vulnerable to unscrupulous securities dealers.
In its most controversial provision, the bill would protect companies from liability when they make financial projections that prove inaccurate. That immunity from lawsuits was seen by many opponents as an invitation for securities companies to lie.
The bill dismantles the concept of joint-and-several liability, which greatly limits a victim's ability to collect. And in cases of massive fraud, a la Charles Keating, the control of class action lawsuits would be given totally to the most wealthy investors--the very people most likely to have ties to the company. …