The media, SEC and public have increased their focus recently on trading by company executives through so-called Rule 10b5-1 plans, which continues to be a problem for public companies, despite a downtick in insider trading cases filed by the SEC last year. The interest has been generated, in part, by an academic paper, which spurred the SEC and Congress to reconsider the rules around trading plans.
An academic paper published in June 2021 highlights the important role of private stockholder litigation and plaintiff lawyers in protecting the rights of shareholders and regulating the financial markets.
This article addresses the perception that every corporate trauma constitutes securities fraud, and that U.S. companies have been overwhelmed by securities actions in recent years. We don’t think the evidence supports that conclusion.
We believe that the deterrent effects of stockholder litigation—and the billions of dollars recovered for millions of investors over the preceding decades—are largely attributable to a small group of individual and institutional investors who were willing to assert their legal rights to remedy corporate misconduct.