Securities Fraud Lawyers - Seeger Weiss Law Firm
The adoption of the Private Securities Litigation Reform Act (PSLRA) in 1995 helped defendants in securities fraud cases by increasing the pleading requirements for successful litigation. PSLRA was created in order to reduce the number of frivolous lawsuits related to SEC Rule 10b-5 outlined in the Securities Exchange Act of 1934. Originally, the 1934 Act protected investors, but as time evolved, defendants plead with the United States Congress to raise the bar on requirements for Rule 10b-5 acceptance by the courts.
Specifically, PSLRA raised the pleading standards for lawyers in security fraud cases. PSLRA requires the plaintiff’s lawyers have more facts in-hand suggesting deliberate fraud before they can proceed with a case. There are three significant new requirements as a result of PSLRA:
- Requirement that false statements be pleaded “with particularity”;
- Requirement that pleading create a “strong inference” of scienter;
- Requirement that the plaintiff prove loss causation.
The requirement that false statements be pleaded “with particularity” means the plaintiff’s security fraud lawyers must identify in their complaint each statement alleged to have been misleading. The lawyers must also state the reasons why the statement was misleading and all facts related to why a particular belief is formed if an allegation regarding the statement or omission by the defendant is made on information and belief. The purpose of requiring plaintiff’s lawyers to set forth with particularity the reasons they find a statement by the defendant misleading is to enable the opportunity for the defendant’s lawyers to put forth arguments in defense.
Like the requirement that false statements be pleaded by security fraud lawyers with particularity, the requirement that “strong inference” of scienter requires that particular facts be given regarding the defendant’s state of mind. This task is often difficult for securities fraud lawyers as their case must be presented without the use of the legal discovery process providing access to needed witnesses and documents helping prove the defendant’s state of mind.
It is now required that plaintiff’s lawyers allege loss causation in the complaint. Also, loss causation has been refined in the Supreme Court decision in Dura Phramaceuticals v. Broudo that economic damage be suffered after relevant truth about the fraud comes to light. For example, a victim who buys a security at an inflated price based on fraudulent information and then sells the security at the same inflated price has suffered no damage. Even if the truth comes out later that the price was inflated with fraudulent information, no loss was caused to the plaintiff. Rather the bad price is considered to be absorbed by the market. Only if the same individual had held onto the security purchased at a bad price until the price fell at the revelation of fraudulent news would the victim be considered to have suffered loss causation.
While PSLRA of 1995 may be considered a victory for defendants of securities fraud litigation by reducing the number of frivolous lawsuits in federal court, the legislation has made it more difficult for a defendant to avoid settlement when all of the pleading requirements are met. For example, if a Rule 10b-5 case is not dismissed, the door is opened for securities fraud lawyers to use the discovery process to depose witness and seek relevant documentation supporting their case. Securities fraud lawyers will then seek class certification by the court to making the case a class action lawsuit. Class certification puts tremendous pressure on the defendant to seek a favorable settlement.
PSLRA might have assisted in decreasing the number of frivolous lawsuits, but securities fraud remains a significant problem in the United States. The abuses by Enron, WorldCom and financier Bernard Madoff demonstrate the damage securities fraud brings to numerous victims. Such significant abuse necessitates assistance from experienced securities fraud lawyers.
Seeger Weiss LLP’s lawyers are experienced in securities fraud litigation and know how to meet the pleading requirements set forth in PSLRA. With Seeger Weiss LLP’s legal assistance, you can receive a favorable settlement related to damage received from securities fraud abuse. If you have a case, please contact Seeger Weiss LLP’s securities fraud lawyers.
Seeger Weiss LLP's law firm also handles cases involving drugs and toxic injury, personal injury, asbestos and mesothelioma, class actions, securities fraud, and commercial litigation. Seeger Weiss LLP has offices in New York, New Jersey, and Philadelphia. Seeger Weiss LLP is a nationally recognized preeminent law firm.
