[Congressional Bills 104th Congress]
[From the U.S. Government Publishing Office]
[H.R. 1058 Introduced in House (IH)]
104th CONGRESS
1st Session
H. R. 1058
To reform Federal securities litigation, and for other purposes.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
February 27, 1995
Mr. Bliley (for himself, Mr. Fields of Texas, Mr. Cox of California,
and Mr. Tauzin) introduced the following bill; which was referred to
the Committee on Commerce and, in addition, to the Committee on the
Judiciary, for a period to be subsequently determined by the Speaker,
in each case for consideration of such provisions as fall within the
jurisdiction of the committee concerned
_______________________________________________________________________
A BILL
To reform Federal securities litigation, and for other purposes.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE; TABLE OF CONTENTS.
(a) Short Title.--This Act may be cited as the ``Securities
Litigation Reform Act''.
(b) Table of Contents.--The table of contents for this Act is as
follows:
Sec. 1. Short title; table of contents.
Sec. 2. Prevention of lawyer-driven litigation.
(a) Plaintiff steering committees to ensure client control of
lawsuits.
``Sec. 36. Class action steering committees.
``(a) Class action steering committee.
``(b) Membership of plaintiff steering committee.
``(c) Functions of plaintiff steering committee.
``(d) Immunity from civil liability; removal.
``(e) Effect on other law.''
(b) Prohibition on attorneys' fees paid from Commission
disgorgement funds.
Sec. 3. Prevention of abusive practices that foment litigation.
(a) Additional provisions applicable to private actions.
``Sec. 20B. Procedures applicable to private actions.
``(a) Elimination of bonus payments to named plaintiffs
in class actions.
``(b) Restrictions on professional plaintiffs.
``(c) Awards of fees and expenses.
``(d) Prevention of abusive conflicts of interest.
``(e) Disclosure of settlement terms to class members.
``(f) Encouragement of finality in settlement
discharges.
``(g) Contribution from non-parties in interests of
fairness.
``(h) Defendant's right to written interrogatories
establishing scienter.''
(b) Prohibition of referral fees that foment litigation.
Sec. 4. Prevention of ``fishing expedition'' lawsuits.
``Sec. 10A. Requirements for securities fraud actions.
``(a) Scienter.
``(b) Requirement for explicit pleading of scienter.
``(c) Dismissal for failure to meet pleading
requirements; stay of discovery; summary
judgment.
``(d) Reliance and causation.
``(e) Allocation of liability.
``(f) Damages.''
Sec. 5. Establishment of ``safe harbor'' for predictive Statements.
``Sec. 37. Application of safe harbor for forward-looking
Statements.
``(a) Safe harbor defined.
``(b) Automatic protective order staying discovery;
expedited procedure.
``(c) Regulatory authority.''
Sec. 6. Rule of construction.
Sec. 7. Effective date.
SEC. 2. PREVENTION OF LAWYER-DRIVEN LITIGATION.
(a) Plaintiff Steering Committees To Ensure Client Control of
Lawsuits.--The Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.)
is amended by adding at the end the following new section:
``SEC. 36. CLASS ACTION STEERING COMMITTEES.
``(a) Class Action Steering Committee.--In any private action
arising under this title seeking to recover damages on behalf of a
class, the court shall, at the earliest practicable time, appoint a
committee of class members to direct counsel for the class (hereafter
in this section referred to as the `plaintiff steering committee') and
to perform such other functions as the court may specify. Court
appointment of a plaintiff steering committee shall not be subject to
interlocutory review.
``(b) Membership of Plaintiff Steering Committee.--
``(1) Qualifications.--
``(A) Number.--A plaintiff steering committee shall
consist of not fewer than 5 class members, willing to
serve, who the court believes will fairly represent the
class.
``(B) Ownership interests.--Members of the
plaintiff steering committee shall have cumulatively
held during the class period not less than--
``(i) the lesser of 5 percent of the
securities which are the subject matter of the
litigation or $10,000,000 in market value of
the securities which are the subject matter of
the litigation; or
``(ii) such smaller percentage or dollar
amount as the court finds appropriate under the
circumstances.
``(2) Named plaintiffs.--Class plaintiffs serving as the
representative parties in the litigation may serve on the
plaintiff steering committee, but shall not comprise a majority
of the committee.
``(3) Noncompensation of members.--Members of the plaintiff
steering committee shall serve without compensation, except
that any member may apply to the court for reimbursement of
reasonable out-of-pocket expenses from any common fund
established for the class.
``(4) Meetings.--The plaintiff steering committee shall
conduct its business at one or more previously scheduled
meetings of the committee, of which prior notice shall have
been given and at which a majority of its members are present
in person or by electronic communication. The plaintiff
steering committee shall decide all matters within its
authority by a majority vote of all members, except that the
committee may determine that decisions other than to accept or
reject a settlement offer or to employ or dismiss counsel for
the class may be delegated to one or more members of the
committee, or may be voted upon by committee members seriatim,
without a meeting.
``(5) Right of nonmembers to be heard.--A class member who
is not a member of the plaintiff steering committee may appear
and be heard by the court on any issue relating to the
organization or actions of the plaintiff steering committee.
``(c) Functions of Plaintiff Steering Committee.--The authority of
the plaintiff steering committee to direct counsel for the class shall
include all powers normally permitted to an attorney's client in
litigation, including the authority to retain or dismiss counsel and to
reject offers of settlement, and the authority to accept an offer of
settlement subject to final approval by the court. Dismissal of counsel
other than for cause shall not limit the ability of counsel to enforce
any contractual fee agreement or to apply to the court for a fee award
from any common fund established for the class.
``(d) Immunity From Civil Liability; Removal.--Any person serving
as a member of a plaintiff steering committee shall be immune from any
civil liability for any negligence in performing such service, but
shall not be immune from liability for intentional misconduct or from
the assessment of costs pursuant to section 20B(c). The court may
remove a member of a plaintiff steering committee for good cause shown.
``(e) Effect on Other Law.--This section does not affect any other
provision of law concerning class actions or the authority of the court
to give final approval to any offer of settlement.''.
(b) Prohibition on Attorneys' Fees Paid From Commission
Disgorgement Funds.--Section 21(d) of the Securities Exchange Act of
1934 (15 U.S.C. 78u(d)) is amended by adding at the end the following
new paragraph:
``(4) Prohibition on Attorneys' Fees Paid From Commission
Disgorgement Funds.--Except as otherwise ordered by the court, funds
disgorged as the result of an action brought by the Commission, or of
any Commission proceeding, shall not be distributed as payment for
attorneys' fees or expenses incurred by private parties seeking
distribution of the disgorged funds.''.
SEC. 3. PREVENTION OF ABUSIVE PRACTICES THAT FOMENT LITIGATION.
(a) Additional Provisions Applicable to Private Actions.--The
Securities Exchange Act of 1934 is amended by inserting after section
20A (15 U.S.C. 78t-1) the following new section:
``procedures applicable to private actions
``Sec. 20B. (a) Elimination of Bonus Payments to Named Plaintiffs
in Class Actions.--In any private action under this title that is
certified as a class action pursuant to the Federal Rules of Civil
Procedure, the portion of any final judgment or of any settlement that
is awarded to class plaintiffs serving as the representative parties
shall be equal, on a per share basis, to the portion of the final
judgment or settlement awarded to all other members of the class.
Nothing in this subsection shall be construed to limit the award to any
representative parties of actual expenses (including lost wages)
relating to the representation of the class.
``(b) Restrictions on Professional Plaintiffs.--Except as the court
may otherwise permit for good cause, a person may be a named plaintiff,
or an officer, director, or fiduciary of a named plaintiff, in no more
than 5 class actions filed during any 3-year period.
``(c) Awards of Fees and Expenses.--
``(1) Authority to award fees and expenses.--If the court
in any private action arising under this title enters a final
judgment against a party litigant on the basis of a motion to
dismiss, motion for summary judgment, or a trial on the merits,
the court shall, upon motion by the prevailing party, determine
whether (A) the position of the losing party was not
substantially justified, (B) imposing fees and expenses on the
losing party or the losing party's attorney would be just, and
(C) the cost of such fees and expenses to the prevailing party
is substantially burdensome or unjust. If the court makes the
determinations described in clauses (A), (B), and (C), the
court shall award the prevailing party reasonable fees and
other expenses incurred by that party. The determination of
whether the position of the losing party was substantially
justified shall be made on the basis of the record in the
action for which fees and other expenses are sought, but the
burden of persuasion shall be on the prevailing party.
``(2) Security for payment of costs in class actions.--In
any private action arising under this title that is certified
as a class action pursuant to the Federal Rules of Civil
Procedure, the court shall require an undertaking from the
attorneys for the plaintiff class, the plaintiff class, or
both, in such proportions and at such times as the court
determines are just and equitable, for the payment of the fees
and expenses that may be awarded under paragraph (1).
``(3) Application for fees.--A party seeking an award of
fees and other expenses shall, within 30 days of a final,
nonappealable judgment in the action, submit to the court an
application for fees and other expenses that verifies that the
party is entitled to such an award under paragraph (1) and the
amount sought, including an itemized statement from any
attorney or expert witness representing or appearing on behalf
of the party stating the actual time expended and the rate at
which fees and other expenses are computed.
``(4) Allocation and size of award.--The court, in its
discretion, may--
``(A) determine whether the amount to be awarded
pursuant to this section shall be awarded against the
losing party, its attorney, or both; and
``(B) reduce the amount to be awarded pursuant to
this section, or deny an award, to the extent that the
prevailing party during the course of the proceedings
engaged in conduct that unduly and unreasonably
protracted the final resolution of the action.
``(5) Awards in discovery proceedings.--In adjudicating any
motion for an order compelling discovery or any motion for a
protective order made in any private action arising under this
title, the court shall award the prevailing party reasonable
fees and other expenses incurred by the party in bringing or
defending against the motion, including reasonable attorneys'
fees, unless the court finds that special circumstances make an
award unjust.
``(6) Rule of construction.--Nothing in this subsection
shall be construed to limit or impair the discretion of the
court to award costs pursuant to other provisions of law.
``(7) Protection against abuse of process.--In any action
to which this subsection applies, a court shall not permit a
plaintiff to withdraw from or voluntarily dismiss such action
if the court determines that such withdrawal or dismissal is
taken for purposes of evasion of the requirements of this
subsection.
``(8) Definitions.--For purposes of this subsection--
``(A) The term `fees and other expenses' includes
the reasonable expenses of expert witnesses, the
reasonable cost of any study, analysis, report, test,
or project which is found by the court to be necessary
for the preparation of the party's case, and reasonable
attorneys' fees and expenses. The amount of fees
awarded under this section shall be based upon
prevailing market rates for the kind and quality of
services furnished.
``(B) The term `substantially justified' shall have
the same meaning as in section 2412(d)(1) of title 28,
United States Code.
``(d) Prevention of Abusive Conflicts of Interest.--In any private
action under this title pursuant to a complaint seeking damages on
behalf of a class, if the class is represented by an attorney who
directly owns or otherwise has a beneficial interest in the securities
that are the subject of the litigation, the court shall, on motion by
any party, make a determination of whether such interest constitutes a
conflict of interest sufficient to disqualify the attorney from
representing the class.
``(e) Disclosure of Settlement Terms to Class Members.--In any
private action under this title that is certified as a class action
pursuant to the Federal Rules of Civil Procedure, any settlement
agreement that is published or otherwise disseminated to the class
shall include the following statements:
``(1) Statement of potential outcome of case.--
``(A) Agreement on amount of damages and likelihood
of prevailing.--If the settling parties agree on the
amount of damages per share that would be recoverable
if the plaintiff prevailed on each claim alleged under
this title and the likelihood that the plaintiff would
prevail--
``(i) a statement concerning the amount of
such potential damages; and
``(ii) a statement concerning the
likelihood that the plaintiff would prevail on
the claims alleged under this title and a brief
explanation of the reasons for that conclusion.
``(B) Disagreement on amount of damages or
likelihood of prevailing.--If the parties do not agree
on the amount of damages per share that would be
recoverable if the plaintiff prevailed on each claim
alleged under this title or on the likelihood that the
plaintiff would prevail on those claims, or both, a
statement from each settling party concerning the issue
or issues on which the parties disagree.
``(C) Inadmissibility for certain purposes.--
Statements made in accordance with subparagraphs (A)
and (B) concerning the amount of damages and the
likelihood of prevailing shall not be admissible for
purposes of any Federal or State judicial action or
administrative proceeding.
``(2) Statement of attorneys' fees or costs sought.--If any
of the settling parties or their counsel intend to apply to the
court for an award of attorneys' fees or costs from any fund
established as part of the settlement, a statement indicating
which parties or counsel intend to make such an application,
the amount of fees and costs that will be sought (including the
amount of such fees and costs determined on a per-share basis,
together with the amount of the settlement proposed to be
distributed to the parties to suit, determined on a per-share
basis), and a brief explanation of the basis for the
application. Such information shall be clearly summarized on
the cover page of any notice to a party of any settlement
agreement.
``(3) Identification of lawyers' representatives.--The name
and address of one or more representatives of counsel for the
class who will be reasonably available to answer written
questions from class members concerning any matter contained in
any notice of settlement published or otherwise disseminated to
the class.
``(4) Other information.--Such other information as may be
required by the court, or by any plaintiff steering committee
appointed by the court pursuant to section 36.
``(f) Encouragement of Finality in Settlement Discharges.--
``(1) Discharge.--A defendant who settles any private
action arising under this title at any time before verdict or
judgment shall be discharged from all claims for contribution
brought by other persons with respect to the matters that are
the subject of such action. Upon entry of the settlement by the
court, the court shall enter a bar order constituting the final
discharge of all obligations to the plaintiff of the settling
defendant arising out of the action. The order shall bar all
future claims for contribution or indemnity arising out of the
action--
``(A) by nonsettling persons against the settling
defendant; and
``(B) by the settling defendant against any
nonsettling defendants.
``(2) Reduction.--If a person enters into a settlement with
the plaintiff prior to verdict or judgment, the verdict or
judgment shall be reduced by the greater of--
``(A) an amount that corresponds to the percentage
of responsibility of that person; or
``(B) the amount paid to the plaintiff by that
person.
``(g) Contribution From Non-Parties in Interests of Fairness.--
``(1) Right of contribution.--A person who becomes liable
for damages in any private action under this title (other than
an action under section 9(e) or 18(a)) may recover contribution
from any other person who, if joined in the original suit,
would have been liable for the same damages.
``(2) Statute of limitations for contribution.--Once
judgment has been entered in any such private action
determining liability, an action for contribution must be
brought not later than 6 months after the entry of a final,
nonappealable judgment in the action.
``(h) Defendant's Right to Written Interrogatories Establishing
Scienter.--In any private action under this title in which the
plaintiff may recover money damages, the court shall, when requested by
a defendant, submit to the jury a written interrogatory on the issue of
each such defendant's state of mind at the time the alleged violation
occurred.''.
(b) Prohibition of Referral Fees That Foment Litigation.--Section
15(c) of the Securities Exchange Act of 1934 (15 U.S.C. 78o(c)) is
amended by adding at the end the following new paragraph:
``(8) Receipt of Referral Fees.--No broker or dealer, or person
associated with a broker or dealer, may solicit or accept remuneration
for assisting an attorney in obtaining the representation of any
customer in any private action under this title.''.
SEC. 4. PREVENTION OF ``FISHING EXPEDITION'' LAWSUITS.
The Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.) is
amended by inserting after section 10 the following new section:
``SEC. 10A. REQUIREMENTS FOR SECURITIES FRAUD ACTIONS.
``(a) Scienter.--
``(1) In general.--In any private action arising under this
title based on a fraudulent statement, liability may be
established only on proof that--
``(A) the defendant directly or indirectly made a
fraudulent statement;
``(B) the defendant possessed the intention to
deceive, manipulate, or defraud; and
``(C) the defendant made such fraudulent statement
knowingly or recklessly.
``(2) Fraudulent statement.--For purposes of this section,
a fraudulent statement is a statement that contains an untrue
statement of a material fact, or omits a material fact
necessary in order to make the statements made, in the light of
the circumstances in which they were made, not misleading.
``(3) Knowingly.--For purposes of paragraph (1), a
defendant makes a fraudulent statement knowingly if the
defendant knew that the statement of a material fact was untrue
at the time it was made, or knew that an omitted fact was
necessary in order to make the statements made, in the light of
the circumstances in which they were made, not misleading.
``(4) Recklessness.--For purposes of paragraph (1), a
defendant makes a fraudulent statement recklessly if the
defendant, in making such statement, is guilty of highly
unreasonable conduct that (A) involves not merely simple or
even gross negligence, but an extreme departure from standards
of ordinary care, and (B) presents a danger of misleading
buyers or sellers that was either known to the defendant or so
obvious that the defendant must have been consciously aware of
it. For example, a defendant who genuinely forgot to disclose,
or to whom disclosure did not come to mind, is not reckless.
``(b) Requirement for Explicit Pleading of Scienter.--In any
private action to which subsection (a) applies, the complaint shall
specify each statement or omission alleged to have been misleading, and
the reasons the statement or omission was misleading. The complaint
shall also make specific allegations which, if true, would be
sufficient to establish scienter as to each defendant at the time the
alleged violation occurred. It shall not be sufficient for this purpose
to plead the mere presence of facts inconsistent with a statement or
omission alleged to have been misleading. If an allegation is made on
information and belief, the complaint shall set forth with specificity
all information on which that belief is formed.
``(c) Dismissal for Failure To Meet Pleading Requirements; Stay of
Discovery; Summary Judgment.--In any private action to which subsection
(a) applies, the court shall, on the motion of any defendant, dismiss
the complaint if the requirements of subsection (b) are not met, except
that the court may, in its discretion, permit a single amended
complaint to be filed. During the pendency of any such motion to
dismiss, all discovery and other proceedings shall be stayed unless the
court finds upon the motion of any party that particularized discovery
is necessary to preserve evidence or to prevent undue prejudice to that
party. If a complaint satisfies the requirements of subsection (b), the
plaintiff shall be entitled to conduct discovery limited to the facts
concerning the allegedly misleading statement or omission. Upon
completion of such discovery, the parties may move for summary
judgment.
``(d) Reliance and Causation.--
``(1) In general.--In any private action to which
subsection (a) applies, the plaintiff shall prove that--
``(A) he or she had knowledge of, and relied (in
connection with the purchase or sale of a security) on,
the statement that contained the misstatement or
omission described in subsection (a)(1); and
``(B) that the statement containing such
misstatement or omission proximately caused (through
both transaction causation and loss causation) any loss
incurred by the plaintiff.
``(2) Fraud on the market.--For purposes of paragraph (1),
reliance may be proven by establishing that the market as a
whole considered the fraudulent statement, that the price at
which the security was purchased or sold reflected the market's
estimation of the fraudulent statement, and that the plaintiff
relied on that market price. Proof that the market as a whole
considered the fraudulent statement may consist of evidence
that the statement--
``(A) was published in publicly available research
reports by analysts of such security;
``(B) was the subject of news articles;
``(C) was delivered orally at public meetings by
officers of the issuer, or its agents;
``(D) was specifically considered by rating
agencies in their published reports; or
``(E) was otherwise made publicly available to the
market in a manner that was likely to bring it to the
attention of, and to be considered as credible by,
other active participants in the market for such
security.
Nonpublic information may not be used as proof that the market
as a whole considered the fraudulent statement.
``(3) Presumption of reliance.--Upon proof that the market
as a whole considered the fraudulent statement pursuant to
paragraph (2), the plaintiff is entitled to a rebuttable
presumption that the price at which the security was purchased
or sold reflected the market's estimation of the fraudulent
statement and that the plaintiff relied on such market price.
This presumption may be rebutted by evidence that--
``(A) the market as a whole considered other
information that corrected the allegedly fraudulent
statement; or
``(B) the plaintiff possessed such corrective
information prior to the purchase or sale of the
security.
``(4) Reasonable expectation of integrity of market
price.--A plaintiff who buys or sells a security for which it
is unreasonable to rely on market price to reflect all current
information may not establish reliance pursuant to paragraph
(2). For purposes of paragraph (2), the following factors shall
be considered in determining whether it was reasonable for a
party to expect the market price of the security to reflect
substantially all publicly available information regarding the
issuer of the security:
``(A) The weekly trading volume of any class of
securities of the issuer of the security.
``(B) The existence of public reports by securities
analysts concerning any class of securities of the
issuer of the security.
``(C) The eligibility of the issuer of the
security, under the rules and regulations of the
Commission, to incorporate by reference its reports
made pursuant to section 13 of this title in a
registration statement filed under the Securities Act
of 1933 in connection with the sale of equity
securities.
``(D) A history of immediate movement of the price
of any class of securities of the issuer of the
security caused by the public dissemination of
information regarding unexpected corporate events or
financial releases.
In no event shall it be considered reasonable for a party to
expect the market price of the security to reflect
substantially all publicly available information regarding the
issuer of the security unless the issuer of the security has a
class of securities listed and registered on a national
securities exchange or quoted on the automated quotation system
of a national securities association.
``(e) Allocation of Liability.--
``(1) Joint and several liability for knowing fraud.--A
defendant who is found liable for damages in a private action
to which subsection (a) applies may be liable jointly and
severally only if the trier of fact specifically determines
that the defendant acted knowingly (as defined in subsection
(a)(3)).
``(2) Proportionate liability for recklessness.--If the
trier of fact does not make the findings required by paragraph
(1) for joint and several liability, a defendant's liability in
a private action to which subsection (a) applies shall be
determined under paragraph (3) of this subsection only if the
trier of fact specifically determines that the defendant acted
recklessly (as defined in subsection (a)(4)).
``(3) Determination of proportionate liability.--If the
trier of fact makes the findings required by paragraph (2), the
defendant's liability shall be determined as follows:
``(A) The trier of fact shall determine the
percentage of responsibility of the plaintiff, of each
of the defendants, and of each of the other persons or
entities alleged by the parties to have caused or
contributed to the harm alleged by the plaintiff. In
determining the percentages of responsibility, the
trier of fact shall consider both the nature of the
conduct of each person and the nature and extent of the
causal relationship between that conduct and the damage
claimed by the plaintiff.
``(B) For each defendant, the trier of fact shall
then multiply the defendant's percentage of
responsibility by the total amount of damage suffered
by the plaintiff that was caused in whole or in part by
that defendant and the court shall enter a verdict or
judgment against the defendant in that amount. No
defendant whose liability is determined under this
subsection shall be jointly liable on any judgment
entered against any other party to the action.
``(C) Except where contractual relationship
permits, no defendant whose liability is determined
under this paragraph shall have a right to recover any
portion of the judgment entered against such defendant
from another defendant.
``(4) Effect of Provision.--This subsection relates only to
the allocation of damages among defendants. Nothing in this
subsection shall affect the standards for liability under any
private action arising under this title.
``(f) Damages.--In any private action to which subsection (a)
applies, and in which the plaintiff claims to have bought or sold the
security based on a reasonable belief that the market value of the
security reflected all publicly available information, the plaintiff's
damages shall not exceed the lesser of--
``(1) the difference between the price paid by the
plaintiff for the security and the market value of the security
immediately after dissemination to the market of information
which corrects the fraudulent statement; and
``(2) the difference between the price paid by the
plaintiff for the security and the price at which the plaintiff
sold the security after dissemination of information correcting
the fraudulent statement.''.
SEC. 5. ESTABLISHMENT OF ``SAFE HARBOR'' FOR PREDICTIVE STATEMENTS.
The Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.) is
amended by adding at the end the following new section:
``SEC. 37. APPLICATION OF SAFE HARBOR FOR FORWARD-LOOKING STATEMENTS.
``(a) Safe Harbor Defined.--In any action arising under this title
based on a fraudulent statement (within the meaning of section 10A), a
person shall not be liable for the publication of any projection if--
``(1) the basis for such projection is briefly described
therein, with citations (which may be general) to
representative sources or authority, and a disclaimer is made
to alert persons for whom such information is intended that the
projections should not be given any more weight than the
described basis therefor would reasonably justify; and
``(2) the basis for such projection is not inaccurate as of
the date of publication, determined without benefit of
subsequently available information or information not known to
such person at such date.
``(b) Automatic Protective Order Staying Discovery; Expedited
Procedure.--In any action arising under this title based on a
fraudulent statement (within the meaning of section 10A) by any person,
such person may, at any time beginning after the filing of the
complaint and ending 10 days after the filing of such person's answer
to the complaint, move to obtain an automatic protective order under
the safe harbor procedures of this section. Upon such motion, the
protective order shall issue forthwith to stay all discovery as to the
moving party, except that which is directed to the specific issue of
the applicability of the safe harbor. A hearing on the applicability of
the safe harbor shall be conducted within 45 days of the issuance of
such protective order. At the conclusion of the hearing, the court
shall either (1) dismiss the portion of the action based upon the use
of a projection to which the safe harbor applies, or (2) determine that
the safe harbor is unavailable in the circumstances.
``(c) Regulatory Authority.--In consultation with investors and
issuers of securities, the Commission shall adopt rules and regulations
to facilitate the safe harbor provisions of this section. Such rules
and regulations shall--
``(1) include clear and objective guidance that the
Commission finds sufficient for the protection of investors,
``(2) prescribe such guidance with sufficient particularity
that compliance shall be readily ascertainable by issuers prior
to issuance of securities, and
``(3) provide that projections that are in compliance with
such guidance and that concern the future economic performance
of an issuer of securities registered under section 12 of this
title will be deemed not to be in violation of section 10(b) of
this title.''.
SEC. 6. RULE OF CONSTRUCTION.
Nothing in the amendments made by this Act shall be deemed to
create or ratify any implied private right of action, or to prevent the
Commission by rule from restricting or otherwise regulating private
actions under the Securities Exchange Act of 1934.
SEC. 7. EFFECTIVE DATE.
This Act and the amendments made by this Act are effective on the
date of enactment of this Act and shall apply to cases commenced after
such date of enactment.
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