As if you needed more facts to dispel the arguments by Secretary of Treasury Paulson and others -- that US securities markets are too regulated and subject to litigation -- the Institute for Shareholder Services recently reported that only 30 new federal securities class actions were filed in the first quarter of 2007. On a pro-rata basis, this translates into 120 new federal securities class actions for the year -- a slight increase from 2006, but significantly below historical levels.
As many of our readers know, the number of securities fraud cases declined significantly after enactment of the Private Securities Litigation Reform Act in 1995. Despite this empirical fact, Paulson would have you believe that the opposite is true and that Congress or the SEC must act quickly to make private lawsuits even more difficult. Similarly, despite the fact that only one securities class action named an auditor as a defendant in 2006, the accounting industry is spending significant time and resources trying to persuade decision makers in Washington that such litigation is a threat to their very existence.
While facts have never stood in the way of Paulson and his ilk, their arguments about the threat posed by private litigation are particularly misplaced.
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