The Private Securities Litigation Reform Act of 1995 imposes new rules on securities class action investor lawsuits and investors recovery. It mandates full disclosure to investors of proposed settlements, including the amount of attorneys’ fees.
The Private Securities Litigation Reform Act of 1995 implemented several significant changes related to pleading, discovery, liability, class representation and awards fees and expenses. The Act was enacted into law by the U.S. Congress over a veto by then President Clinton.
The Private Securities Litigation Reform Act of 1995 requires a plaintiff to identify in his complaint each statement alleged to have been misleading, the reason or reasons why the statement is misleading, and if an allegation regarding the statement or omission is made on information and belief, the complaint shall state with particularity all facts on which that belief is formed. If a plaintiff's complaint does not specifically identify the allegedly fraudulent statements and explain why they were misleading, the complaint will be dismissed.
The Private Securities Litigation Reform Act of 1995 also requires a plaintiff to allege that the defendant acted with the required state of mind; that he knew the challenged statement was false at the time it was made, or was reckless in not recognizing that the statement was false.
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