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Congressman Vito Fossella (R-NY13) and Congressman Gregory Meeks (D-NY6) today called on the Securities and Exchange Commission (SEC) to schedule a roundtable to address the impact of securities class action litigation on the competitiveness of U.S. businesses and financial markets.
While SEC Chairman Chris Cox announced on August 3 that he would hold a roundtable on the issue in response to an appeal from academic professionals, no date has been scheduled for the meeting as of yet.
In a letter today to Chairman Cox, the lawmakers said the roundtable would provide an opportunity for market leaders and experts to explore the most effective way to balance the need to protect investors without placing undue burdens on American businesses. Fossella and Meeks said that while they fully support the right of defrauded shareholders to pursue all proper actions, including litigation, the growing size and frequency of securities class action lawsuits is a drain on the competitiveness of the U.S. capital markets and the health of the U.S. economy.
Fossella said, “It is time we conduct a truly comprehensive review of securities litigation. As the body primarily responsible for protecting investors, the SEC should review whether private securities class actions, in light of their costs to businesses, shareholders and employees, are truly achieving what they are intended to do -- provide relief to harmed investors and deter fraud. As we continue moving forward with developing solutions to enhance the competitiveness of U.S. markets and businesses, we must look at the escalating costs of class action lawsuits and their impact on capital formation and growth.”
Meeks said, “As a part of our effort to make certain that U.S. capital markets maintain their competitive advantage, we have to review all possible impediments, including the current legal environment. However, I do not want to preclude litigation as a remedy where it is necessary to make defrauded shareholders whole.”
According to numerous industry reports, the high costs of securities class action litigation is a significant competitive disadvantage for U.S. businesses. Additionally, it has become a deterrent for foreign companies seeking to raise capital in the U.S. public markets.
Meeks is a member of the House Financial Services Committee and the Chair of the Congressional Services Caucus. Fossella is Chairman of a Republican Policy Committee Task Force focused on ways to enhance the capital markets and U.S. economic competitiveness.
