Class Recoveries Increase As The Number Of Institutional Investors Serving As Lead Plaintiffs Continues To Rise 

The US Supreme Court has repeatedly stated that investor-led class actions provide “a most effective weapon in the enforcement of the securities laws.” Since passage of the Securities Act of 1933 and the Securities Exchange Act of 1934 the next year, investors have been given the right to initiate direct and class-action lawsuits to recover losses suffered due to corporate misconduct and fraud. In 1995, Congress enacted the Private Securities Litigation Reform Act of 1995 (the “PSLRA”) in part to increase direct Institutional investor involvement in securities class actions.  The PSLRA provision aimed at increasing investors’ control over litigation is commonly known as the “Lead Plaintiff” provision. Congress did not want the status of Lead Plaintiff to be determined by an inefficient “race to file” process. Instead, Congress wanted to encourage more active participation by larger and institutional investors who would most likely have a greater financial interest in controlling the direction of the class action. Since the passage of the PSLRA’s Lead Plaintiff provision, more and more institutional investors are seeking and obtaining Lead Plaintiff status as they become increasingly familiar with the benefits of being appointed Lead Plaintiff in class actions and continue to adopt portfolio and litigation monitoring services that keep them informed of potential losses and pending litigation where they may want to pursue Lead Plaintiff status.

Source : Scott+Scott August 2008 Newsletter