WASHINGTON, DC - U.S. Senator Richard C. Shelby (R-AL) today introduced legislation designed to protect American investors by deterring fraudulent activities by those associated with the sale of securities. Senator Shelby's bill expands liability for financial services professionals and provides individual investors the opportunity to take legal action against those who aid and abet public companies in the production and dissemination of inaccurate financial information.
Changes to securities laws approved by Congress in 1995 and 1998 significantly weakened existing investor protections. In 1995, Senator Shelby actively opposed S.240, the Private Securities Litigation Reform Act of 1995, because he felt the changes the bill made would make it too difficult for wronged investors to pursue claims against those who harmed them. In 1998, he voted against S.1260, the Securities Litigation Uniform Standards Act, because he believed that the legislation inappropriately restricted investors' legal options.
Senator Shelby said "I believe then and I believe now, the changes Congress made in 1995 and 1998 opened the door for fraud in the securities markets because the bills reduced the likelihood that those responsible for such frauds would be punished for their acts."
Senator Shelby's legislation provides for joint and several liability so that innocent investors can recoup their full losses from the responsible parties. Additionally, it provides a private cause of action for those who aid and abet securities law violations, repeals federal preemptions of state courts, and broadens the statute of limitations from 1 and 3 years (1 year from knowledge of the action and 3 years from the actual date of the action) to 3 and 5 years (respectively).
"Investors are losing confidence today in the honesty and accuracy of financial statements," said Senator Shelby. "If people believe that the markets are rigged or that they have no access to accurate information, they will walk away from the markets."
"Too many in the securities industry have been shielded from investor lawsuits, and that has removed incentives for 'doing the right thing' as far as investors are concerned," added Shelby. "It is critical that the securities industry fulfills its obligations to the public to provide accurate, truthful and objective financial information."