[9957]
May 22, 1998
TO: BOARD OF GOVERNORS No. 32-98
FEDERAL LEGISLATION MEMBERS No. 8-98
PRIMARY CONTACTS - MEMBER COMPLEX No. 39-98
PUBLIC INFORMATION COMMITTEE No. 17-98
RE: SENATE APPROVES SECURITIES LITIGATION UNIFORM STANDARDS
BILL
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The Senate recently approved S. 1260, the "Securities Litigation Uniform Standards Act of
1998," by a vote of 79-21. The legislation would establish a uniform national standard for securities
class action lawsuits and require that they be brought in federal courts, rather than state courts.
Senators Phil Gramm (R-TX) and Christopher Dodd (D-CT) introduced the bill to address an
unintended result of the 1995 Private Securities Litigation Reform Act (PSLRA). Since the PSLRA was
enacted, there has been a shift in class-action lawsuits involving nationally traded securities from federal
to state courts. For example, parties have filed parallel class-action suits in state and federal courts for
the purpose of using the broader state court discovery process. Such action violates the intent of the
PSLRA, which seeks to reduce costly and unnecessary "strike" suits while protecting the rights of
individual shareholders to pursue legal remedies.
S. 1260 would amend the 1933 Securities Act and the 1934 Securities Exchange Act to establish
uniform standards for private class action lawsuits involving nationally traded securities, effectively
preempting state class-actions in certain circumstances. Registered investment companies are covered
under the legislation. The Securities and Exchange Commission, the Administration and the Institute
support S. 1260.
The House Commerce Committee is expected to act shortly after Memorial Day on a similar
House bill, H.R. 1689, which already has over 220 cosponsors, apparently enough to pass the legislation.
We will keep you informed of further developments.
Matthew P. Fink
President