I want to take legal action, but I would like to know a little more about securities litigation before I hire an attorney.

Question: I am a shareholder in a company where the CEO violated certain federal securities laws.  I want to bring an action but before I retain an attorney, I want to know a little more about what is involved in securities litigation.

Response: Securities litigation has nearly doubled in the past decade, especially following such high-profile cases like Enron and WorldCom where employees and stockholders were basically left with nothing.  Whether a class action or a private suit, securities litigation can entail complex actions on both the state and federal levels.   Under the Private Securities Litigation Reform Act of 1995 (Act) has raised the bar on what securities suits can be brought.   Two changes under the Act are a heightened pleading standard, where the attorney must identify with specificity the particular events that constitute fraud or malfeasance; and an automatic stay of discovery, where defendants can waive document production while the court considers any stay of motion brought by the defendants. 

Both measures seek to prevent flimsy filings that had become rampant.  If your case has merit, you will not be prevented from bringing an action, especially where the Securities & Exchange Commission (SEC) has investigated and found financial wrongdoing.  As with any trials, there are particular phases of pleading, discovery, proof of liability, and awards and fees.  You can learn more about the Reform Act at the Securities Industry and Financial Markets Assn. website.  Also visit the SEC website to determine what types of violations fall under its umbrella.  After you are certain you want to bring suit, then consult a securities litigation attorney on your rights.

Answered by Sharon Cullars

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