In its new study (Legal Abandon: How Limiting lawsuits Led to the Financial Collapse and What to Do About It), the center argues that restrictions placed on shareholders through the Private Securities Litigation Reform Act of 1995 (PSLRA) and the Securities Litigation Uniform Standards Act of 1998 allowed corporate and financial executives to get away with risky strategies and decisions that weren’t discovered until the damage was already done.

 

According to the report, “PSLRA bars investors from bringing fraud claims against a corporate entity without a very large amount of evidence in hand and stops all discovery until after a judge decides whether the case can go forward. As one legal scholar put it,

‘You can’t get discovery unless you have a strong evidence of fraud, and you

can’t get strong evidence of fraud without discovery.’”

 

“When it comes to Wall Street’s accountability, victims of predatory mortgage loans that led to the subprime mortgage crisis have been largely left out in the cold due to certain decisions about “assignee liability” by Congress, the Clinton and Bush Administrations and the U.S. Supreme Court,” argue the report’s authors. “Had the law been different from the start, victims could have held Wall Street firms accountable and many believe the subprime mortgage crisis would have been avoided.”

-Noel Brinkerhoff

 

Executive Summary: Legal Abandon: How Limiting lawsuits Led to the Financial Collapse and What to Do About It (by Amy Widman and Joanne Doroshow, Center for Justice and Democracy) (pdf)

Legal Abandon: How Limiting lawsuits Led to the Financial Collapse and What to Do About It (by Amy Widman and Joanne Doroshow, Center for Justice and Democracy) (pdf)