[Congressional Record Volume 144, Number 99 (Wednesday, July 22, 1998)]
[Extensions of Remarks]
[Page E1385]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




          SECURITIES LITIGATION UNIFORM STANDARDS ACT OF 1998

                                 ______
                                 

                               speech of

                             HON. VIC FAZIO

                             of california

                    in the house of representatives

                         Tuesday, July 21, 1998

  Mr. FAZIO of California. Mr. Speaker, during the 104th Congress I 
voted, with a large bipartisan majority of my colleagues, for the 
Private Securities Litigation Reform Act of 1995 (PSLRA) because I 
believed it was an important step toward protecting companies against 
``frivolous'' law suits. The extremely litigious environment that 
existed prior to this legislation had a chilling effect on growth in 
technologies and did little to curb fraud and abuse.
  A new concern has developed, however, which threatens to unravel the 
changes that we have made. In effect, the standards in the Federal 
securities laws, as amended by the PSLRA, are being bypassed.
  According to a study done last year, Stanford University found that 
26 percent of securities class action cases have shifted from Federal 
to State courts. Trial lawyers have discovered a loophole around the 
Federal statute through State litigation, where it is much easier to 
file complaints without substantial cause. This practice is an 
unprecedented and unanticipated move that stands to harm America's 
companies, especially the high tech community.
  These high technology companies account for 34 percent of all the 
issuers sued last year. It is ironic that the very companies that have 
contributed disproportionately to the economic growth of our Nation and 
have been a great source of wealth for investors are the ones being 
harassed. They are, in effect, being penalized for success.
  The Securities Litigation Uniform Standards Act, H.R. 1689, would 
amend the Securities Act of 1933 and the Securities Exchange Act of 
1934 so that any class action law suit brought in any State court 
involving a covered security would be heard in a Federal court. Only 
those suits traditionally filed in Federal courts would be affected by 
H.R. 1689, while those claims that historically have been pursued in 
State courts would be left undisturbed. H.R. 1689 is limited to 
covering nationally traded securities on the New York Stock Exchange, 
NASDAQ, or the American Stock Exchange. At the same time, the 
legislation expressly preserves the authority of public State officials 
to police State securities markets.
  It is clear that what is needed are uniform standards for private 
securities class action litigation to cover nationally marketed 
securities. I hope that my colleagues will join me once again in 
support of securities litigation reform. We need to take action to 
close this loophole and protect our innovative entrepreneurs and 
companies that have done so much toward this country's economic health.

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