Securities Litigation Reform: A Fish Story
Abstract
The paper suggests that the private remedy for securities law violations might be unnecessary. Since the primary movers in the litigation are a small number of plaintiff law firms, the actual plaintiffs are by and large irrelevant; their role is to provide a rationale for damage measurement. But if the damages of the plaintiff class bear no logical relation to the social losses, then it might make sense to simply remove the plaintiffs from the process entirely. Plaintiff law firms are, in a sense, bounty hunters, supplementing the SEC's enforcement effort. The paper suggests that the current situation is similar to an open-access fishery and that a more efficient system might result in more sensible management of that fishery. The supplementary role might be better served if the SEC established a set of fines and then licensed some subset of private lawyers to pursue those fines.