Rescuing foreign issuers

Author: | Published: 1 Sep 2007

In the 1990s, in response to an increasing wave of securities fraud class actions based merely on a decline in the stock price, the US Congress enacted the Private Securities Litigation Reform Act (the PSLRA). The PSLRA amended the federal securities laws for the express purpose of reducing the number of questionable actions by toughening the requirements for securities fraud claims. Initially, those restrictions curtailed the amount of securities fraud litigation in the US. After the eruption caused by corporate accounting frauds such as Enron and WorldCom in the early years of this decade, however, the number of securities fraud class actions increased. At the same time, several federal courts began showing increased tolerance for those actions, in spite of the restrictions imposed by the PSLRA. As a result, the legislative changes effected by the PSLRA have had a more modest impact than Congress intended.

During this time, securities fraud...