[Congressional Record Volume 141, Number 16 (Thursday, January 26, 1995)]
[Extensions of Remarks]
[Page E184]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]


[[Page E184]]
    INTRODUCTION OF ``THE SECURITIES LITIGATION EQUITY ACT OF 1995''

                                 ______


                         HON. NORMAN Y. MINETA

                             of california

                    in the house of representatives

                       Wednesday, January 25, 1995
  Mr. MINETA. Mr. Speaker, I rise today to introduce the Securities 
Litigation Equity Act of 1995 for myself and my colleague, Anna Eshoo.
  We do so with the understanding the importance of a securities 
litigation system that allows private citizens to bring suit for 
securities fraud. The securities suit, when used properly, protects the 
integrity of the market and guards individuals against reckless and 
criminal behavior by people who invest their money. Those investments 
could be a retirement fund or a child's education fund or a down 
payment on a home. In any case, the investor deserves the right to 
legally challenge fraudulent behavior where it truly exists.
  However, Mr. Speaker, the system has strayed from that honorable 
intent. Knee-jerk reaction suits filed by attorneys working with 
professional plaintiffs have severely constricted the flow of 
information emerging from technology industry leaders. More 
importantly, the costs incurred by high-risk industries have gone up. 
This is extremely disturbing when you consider the high costs these 
companies face naturally because of the types of services they provide. 
These costs, in the form of higher insurance premiums, legal fees and 
out of court settlements, result in less capital for the R&D 
investments U.S. high-tech companies use to maintain their position at 
the cutting edge of the world market.
  For these reasons, securities litigation reform is a top priority for 
our Nation's high technology community. Since 1988, 19 of Silicon 
Valley's 30 largest companies have been hit with securities suits. Even 
the most hardened cynics cannot believe that nearly two-thirds of 
Northern California's largest high tech companies are guilty of fraud. 
Rather, we support the contention of companies in our districts that 
there exist fundamental flaws in our securities litigation system. 
These flaws reward abusive and frivolous suits, and cost our Nation's 
most competitive industries millions of dollars in legal fees and 
forced settlements every year.
  It is for these reasons that we introduce this legislation. The 
reforms we are proposing include a moderate but substantive package of 
reforms that will address the systematic incentives for abuse and 
retain the rights of individuals to bring legal action where 
appropriate.
  Our legislation would address the major problems that currently exist 
in the system by:
  Eliminating liability for companies when a stock broker or analyst 
distributes inaccurate information not attributed to the company.
  Reforming the pleading, burden of proof and discovery processes;
  Giving greater control of the litigation to the plaintiffs over the 
attorneys; and
  Eliminating many of the abusive practices currently used by the 
plaintiff's bar.
  It is my hope that as the Commerce Committee marks up legislation for 
consideration by the whole House, it will accept a substantial number 
of the provisions in our bill--some of which are new, and many of which 
have received the benefits of close public scrutiny. Recognizing that a 
gap currently exists between offered legislative proposals, we 
carefully crafted this legislation so that it can be supported by 
Members from both parties, both bodies of Congress, and the key 
industries and associations affected by these practices.


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