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Daniel Gold in Inside Counsel: Federal Securities Law Doesn’t Preclude State Law Class Actions
The 5th Circuit recently addressed an issue of first impression concerning the breadth of the preclusion provision of the Securities Litigation Uniform Standards Act (SLUSA), which prevents plaintiffs from filing state law class action lawsuits alleging fraud tied to nationally traded securities. The court’s decision in Roland v. Green deepened a split among the circuits, signaling possible future Supreme Court review of the issue.
The case stems from when the Securities and Exchange Commission (SEC) accused financier R. Allen Stanford of masterminding a $7 billion Ponzi scheme for two decades in February 2009. The agency claimed Stanford defrauded 30,000 investors in 113 countries by selling them high-yield certificates of deposit (CDs) and promising high returns…
In 1995, Congress passed the Private Securities Litigation Reform Act (PSLRA), which aimed to halt perceived abuses of class actions involving nationally traded securities. “One of the core concerns was a perception that plaintiffs firms could file lawsuits against public companies any time there was a stock price drop based on pretty thin allegations of fraud and then use the discovery process to try to find a valid claim, or use the threat of costly discovery to try to coerce a settlement because the discovery in these types of cases can be voluminous,” says Haynes and Boone Partner Daniel Gold
. Excerpted from Inside Counsel, May 30, 2012. To view the full article, click here.