The Private Securities Litigation Reform Act of 1994, Pub.L. 103-67, enacted several major changes in the U.S., affecting many cases brought under federal and state law. One significant change is that trial attorneys are now permitted to join as observers on trials that are being conducted outside of the jurisdiction of the courts. This, however, should not be taken to mean that all SEC claims should be pursued in federal court. There are many complex issues that require trial lawyers, who are thoroughly experienced in securities fraud and securities litigation, to be intimately knowledgeable about their client’s local venue and the legal process. In some cases, this knowledge may not be available.

There are also significant changes to the rules applicable to both parties. For example, it is now beyond doubt that plaintiffs must show a Prima facie case of injury or harm in order to recover damages. This shift is largely positive for plaintiffs as it makes the process much easier to bring such a claim. Previously, only shareholders were able to show such a case. The changes effected by the Private Securities Litigation Reform Act of 1994 also affect defendants.

First, in private securities litigation, there was an exception to the general rule that an action could be brought on behalf of a class, when all other methods of the class action had been ruled out. The new rule is that a class only requires that more than one individual class members suffer some kind of harm as a result of a negligent act or conduct. The plaintiffs must provide forward-looking information with regard to the likelihood of success of their claim. If they do not, the claim will fail.

Second, the private securities Litigation Reform Act has amended the common standard of negligence for actions brought by plaintiffs. Under the old rules, the plaintiff simply had to prove that there was negligence on the part of a defendant and that this negligence proximately caused harm or injury to the plaintiff. The new rule allows for either a direct or inferring negligence on the part of the defendant. This new stipulation may open the door for more complex claims involving a number of individuals or entities. This is good news for those who may have such a complicated relationship with one another and who might be able to put a spin on how the harm was caused.

Third, the private securities Litigation Reform Act has amended the standard of fraud used in class action cases. The fraud requirement under the old rules was only based upon a defendant’s deliberate acts of deception. The new rule bases its fraud burden solely on a party’s conduct. For example, an audit of a firm’s process in detecting fraud requires proof that the auditor has conducted an inspection that was deficient. Under the new statute, the auditor may not be held liable unless there is proof of a material misstate.

Fourth, the Act has amended the definition of a forward-looking statement. The term has been defined as any statement that is made on a regularly held publicly available web site that contains forward-looking information about the future results of operations and financial projections. Forward-looking statements are to be used as a basis for making business decisions and should be taken as of such times only. A company must provide notice to the Securities and Exchange Commission of any forward-looking statement that is filed with the SEC. To date, this requirement has not been enforced.

Fifth, the Act has amended the definition of securities class. Class refers to persons who may bring a securities class action lawsuit. Persons qualified as members of a securities class are not required to have or anticipate having to bring a securities action if they do not maintain minimum standards of care. In most states, a member of a securities class is not required to do anything other than file a complaint in a civil proceeding. However, if the state court decides that the minimum level of care was not maintained, then the plaintiff is not required to file a complaint.

Private Securities Litigation Reform Act has resulted in many new options for plaintiffs bringing lawsuits. One of the best is the new class action lawsuit. Unlike securities cases, it does not require an investment on behalf of the plaintiff and is generally faster to win. The plaintiff does not need to rely on the strength of their attorney’s predictions of actual results because this evidence will not be admissible in a civil liability case.

The Private Securities Litigation Reform Act of 1994, Pub.L.104-67, adapted many substantive changes in the United States regarding private securities litigation. One of the most significant pieces of the act is the requirement that broker-dealers must inform clients of the nature and expected outcome of the transactions in a written statement. The statements must also include a risk-based disclosure statement. The purpose of this disclosure statement is to give the client a reasonable picture of the potential downside or reward of such an investment. In most instances, broker-dealers are fiduciaries and must therefore deliver this information.

However, this Act does not apply to plaintiffs’ private securities litigation. That is, the new Act does not require broker-dealers to disclose the risks associated with their investments; it only requires them to make reasonably good faith representations. There are however, some exceptions to this rule. For instance, if the firm has actual notice that there is a question of material misstatements or omissions among its portfolio investments, it must inform the client promptly and provide reasonable accommodations for those hardships. And, if it is required by law or the statute to maintain a record of such investments, then it must also do so.

However, plaintiffs’ private securities litigation fall outside of these statutes’ requirements to disclose materials. Plaintiffs are required to prove “a concrete probability that a plaintiff will receive a settlement award when they resolve the claim.” The new Act falls within this strict requirement. Thus, plaintiffs have a much greater chance of obtaining a judgment against a defendant who failed to make reasonable disclosures, especially in securities class actions.

The securities class action lawsuit reform Act also extends the statute of limitations on securities fraud claims to include all class action plaintiffs. Previously, the statute of limitations on securities fraud cases had been 10 years from the date of the breach. With the passage of the Act, the limit has been increased to a lifetime. However, an action may be brought sooner than the limitation period begins if the investor, to wit, the defrauded entity, is no longer within the age of majority.

Finally, the Act includes provisions to implement the provisions of the Sarbanes Oxley andizenkan amendments. These amendments, passed by Congress in 2002, increase the penalties for securities fraud. Specifically, the Act authorizes the U.S. attorney to “forfeiture, for cause, any property used or intended to be used to commit such fraud, and to destroy or carry away any records, papers, securities or other things used or related to such fraud.” As previously noted, the penalties are based on the amount of money involved and the defrauding of investors. Additionally, the United States Attorney General can also order civil penalties against the liable party. The Act also requires each broker and publisher to inform their clients about the new provisions.

The PPLRRA also requires each broker and publisher to inform any individual that receives or purchases of investment securities or a product that has become a fraud. Additionally, as required by the Act, all brokerage and sales organizations must inform their customers and shareholders of “any false or unsubstantiated statements or rumors which have a reasonable likelihood to deceive the buyer or a consignor.” In addition, the Act also requires each broker and publisher to inform any person underwriting a security that a transaction does not pass the “first-of-a-kind” test. As defined, the first-of-a-kind test is a test that is used to determine whether or not the sales process would result in a profit for the issuer. The publishers and brokers are required to explain this provision and the effect it has on the trading environment.

While the federal courts may be reluctant to enjoin enforcement of the Act, the PPLRRA can still have meaningful deterrence effects. For example, in the event that a brokerage publishes inaccurate information, the brokerage’s insured client will be the recipient of the inaccurate information. However, if the brokerage is unable to correct the inaccurate information, the client may be able to file a lawsuit against the brokerage. This can provide additional incentive for brokers and publishers to make accurate information readily available to their customers and shareholders. Because of the Act’s emphasis on mandatory customer notifications, courts may be more likely to prevent unwarranted securities lawsuits.

The final part of the Act requires each broker and publisher to submit annual reports to the Secretary of the Department of Securities and Exchange Commission regarding their compliance with the Private Securities Litigation Reform Act. In the 2010 report, the majority of brokerage firms provided an annual disclosure of how many unwarranted securities lawsuits they had settled, along with an identification of the court that had issued the complaint against them. This information can help the Secretary performs his role of ensuring compliance with the securities laws. Although the private securities litigation reform act has many worthwhile aspects, some aspects of the Act are problematic. One problem is that Congress may not continue to revisit the Act for years, if ever. For this reason, the future of the Act will remain uncertain for both brokers and publishers.

Data can be the determining factor as to whether a settlement is valid or not

Due to the shifting and evolving dynamics of the corporate sector, it has become imperative to closely analyze financial agreements. As these economic conditions provide new potentials for obtaining new investment opportunities, it is important to confirm the validity of these deals prior to committing to the contract.

Without an effective data collection strategy, the best course of action is the hiring of legal representation companies. These firms can be categorized into three different categories, each with its own role to play. Private Securities Litigation Reform Act (PSLRA) allows courts to request data from firms that represent the parties in a case before the court.

In this way, the parties have access to the data at any time for review. They may have required information, such as historical data, current data obtained through data collection. They will also need to provide evidence regarding the accuracy of the data.

For example, firms like JML Holdings and Skadden Arps allow law firms to store and deliver this data to judges or other authorities without having to keep on file any copies.

Many law firms use a third-party data warehouse to store and retrieve data prior to final decisions

Another important feature is the ability to search by date, subject matter, or subject classification. To access this data, you will need to contact the data room service providers australian-dataroom.net and request your data by one of the options available. To find out more about what type of data you are searching for, consult your data management policy manual.

This data can come in handy for small or large firms. Depending on your firm size, you may be able to analyze a selection of private securities litigation data and discover important business trends.

Historical data provides a detailed perspective on past and recent history, helping to identify key performance indicators and focusing on areas of improvement. Current data can help firms anticipate future problems and offer responses before these issues become critical.

Using this data can also assist companies in identifying market opportunities and pricing models that offer advantages. It can be used to forecast market forces, the emergence of new markets, and forecast pricing changes that are likely to occur over the next several years.

Although this data is considered private, it is vital to share with investors. As with any investment, if the data is not correct, the investor may lose money. This is why the private securities litigation reform act allows for data to be shared with investors with public interest consideration.

Private Securities Litigation Reform Act (PSLRA) provides a national database that helps allow for the information to be accessed in real-time. The law states that there must be adequate and timely access to the data, while at the same time providing transparency and accountability to investors.

Data providers should abide by this mandate in order to ensure they are adequately working towards the government’s intent for information sharing. The government recognizes that the failure to provide this public information poses a threat to investors and as such has directed all data providers to develop procedures for meeting this demand.

PensionLitigationData.com is proud to debut a new study about pension litigation statistics for plan sponsors, their service providers, legal counsel and policy-makers, respectively.

Based on over 2,400 ERISA cases filed between January 1, 2005 and August 31, 2008, ERISA Litigation Study is a statistical overview of pension lawsuits by category, court and case disposition.

The study’s findings include the following:

* ERISA lawsuits are increasing in number and complexity in terms of combinations of allegations.

* Nearly every case in the PensionLitigationData.com database is categorized as including an allegation of fiduciary breach.

* ERISA litigation volume was highest for the 2nd, 3rd and 6th federal circuit courts.

* A majority of ERISA-related lawsuits settled out of court.

* Numerous cases examined reflect an ERISA Section 502 claim. (ERISA Section 502 relates to civil enforcements.)

* Some legal venues favored plaintiffs in terms of the reported outcome.
To download the study, click here.

Recent Court of Appeals decisions grapple with individuals in a Plan context

A recent Sixth Circuit decision has opened the courtroom doors to individual participants harmed by a Plan Fiduciary’s breach of fiduciary duty by eliminating a previous requirement that individual plan participants sue on behalf of the entire plan, rather than only for their individual losses. In Tullis v. UMB Bank, the Sixth Circuit granted standing to two physicians who were defrauded of almost $1.8 million by their plan’s investment advisor when the fiduciary continued to employ an advisor who made improper trades and failed to make trades, even after the SEC suspended the investment company’s ability to operate.

In allowing the individual suits to go forward, the Sixth Circuit has removed a Plan’s first line of defense in protecting itself against ERISA violation claims. Click here to read the full article.

In contrast, a First Circuit decision demonstrated that a “top hat” excess compensation plan is still exempt under ERISA, even when the individual executives are not given an opportunity to negotiate the terms of their pension packages, and do not have individual bargaining power. In Alexander v. Brigham and Women’s Physicians Organization, Inc., the First Circuit broke with other federal circuits in approving a Plan’s seizure of more than $400,000 from a Massachusetts surgeon’s deferred compensation account after terminating him. Click here to read the full article.

Journalist Rachel McMurdie addresses the relationship between good pension governance and litigation events. In “Investing in Good Governance: Subprime-Related Losses Stir Up the Conversation,” the January 2008 issue of The Institutional Real Estate Newsletter credits Pension Governance, LLC founder, Dr. Susan Mangiero, as saying “People must pay closer attention to the proper identification, measurement and management of investment risks. That includes making inquiries about how their fund managers deal with risk, how they value thinly traded securities and the extent to which they employ leverage.” ERISA attorney Steve Rosenberg with The McCormick Firm” predicts more lawsuits. “The problem we’re seeing consistently is that [pension funds] don’t do sufficient investigation.” He adds “They don’t bring in sufficient expertise and they get blind-sided.” Reference is made to www.PensionLitigationData.com, notably the large number of cases being added each quarter. Click here to read the article.

PensionLitigationData.com debuts with over 1,500 retirement plan legal actions, each classified by nearly 100 fields, including court circuit, type of allegation, plaintiff, defendant and date. A joint venture of Pension Governance, LLC and The Michel-Shaked Group, this continuously updated and searchable database reflects the dramatic rise in pension lawsuits. Market volatility, complex investment strategies, new accounting rules, federal regulations and heightened scrutiny of financial decision-making are a few of the many reasons that explain the addition of hundreds more cases each quarter. This unique web-enabled tool helps attorneys, trustees, board members and policy-makers to better understand the nature of individual pension lawsuits and related litigation trends, thereby encouraging better practices.

To read the rest of the announcement, click here.

In a new article published by PensionLitigationDatabase.com, analysts describe an increase in litigation relating to multiemployer plan withdrawals. Under current rules, an employer seeking to exit must continue payments to the plan to help fund its obligation to pay vested benefits. Cases making their way through the legal system allege employer failure to comply in paying a proportionate share of what is owed. Click here to read about this important topic.