Securities Law—The Erosion of Securities Class Actions

In the last fifteen years, Congress has enacted Federal Rule of Civil Procedure 23, The Private Securities Litigation Reform Act of 1995, and the Securities Litigation Uniform Standards Act of 1998 (collectively the securities legislation ). This note examines interrelated provisions of the securities legislation and the resulting impact on the effectiveness of class actions as a remedy for defrauded investors. First, the note discusses securities class actions and the background, history, and intended goal of each relevant legislative provision. Next, the note discusses the securities legislation\u27s impact on the feasibility of securities class actions, the parties to securities class actions, and the disconnect between the securities legislation\u27s goal and the securities legislation\u27s practical application with regard to settlement opt-out claims. Thereafter, the note discusses existing mechanisms that may serve as viable solutions to the aforementioned difficulties before proposing a new solution to the problem. The note concludes that the individual pieces of securities legislation were drafted with good intentions to fix the perceived problems with the class action system. However, collectively, the securities legislation creates unintended conflicts which result in many obstacles in securities litigation and limit the rights of small individual investors. Accordingly, the note proposes that a resolution which combines sanctions with a heightened standard for exclusion would go a long way toward addressing the inherent conflicts in the securities legislation