Pub.L. 104-68 To designate the Federal Triangle Project under construction at 14th Street and Pennsylvania Avenue, Northwest, in the District of Columbia, <> as the ``Ronald Reagan Building and International Trade Center...

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Public Law 104-67
104th Congress

                                 An Act


 
         To reform Federal securities litigation, and for other 
            purposes. <<NOTE: Dec. 22, 1995 -  [H.R. 1058]>> 

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled, <<NOTE: Private 
Securities Litigation Reform Act of 1995.>> 

SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

    (a) <<NOTE: 15 USC 78a note.>> Short Title.--This Act may be cited 
as the ``Private Securities Litigation Reform Act of 1995''.

    (b) Table of Contents.--The table of contents for this Act is as 
follows:

Sec. 1. Short title; table of contents.

                TITLE I--REDUCTION OF ABUSIVE LITIGATION

Sec. 101. Private securities litigation reform.
Sec. 102. Safe harbor for forward-looking statements.
Sec. 103. Elimination of certain abusive practices.
Sec. 104. Authority of Commission to prosecute aiding and abetting.
Sec. 105. Loss causation.
Sec. 106. Study and report on protections for senior citizens and 
           qualified retirement plans.
Sec. 107. Amendment to Racketeer Influenced and Corrupt Organizations 
           Act.
Sec. 108. Applicability.

               TITLE II--REDUCTION OF COERCIVE SETTLEMENTS

Sec. 201. Proportionate liability.
Sec. 202. Applicability.
Sec. 203. Rule of construction.

            TITLE III--AUDITOR DISCLOSURE OF CORPORATE FRAUD

Sec. 301. Fraud detection and disclosure.

                TITLE I--REDUCTION OF ABUSIVE LITIGATION

SEC. 101. PRIVATE SECURITIES LITIGATION REFORM.

    (a) Securities Act of 1933.--Title I of the Securities Act of 1933 
(15 U.S.C. 77a et seq.) is amended by adding at the end the following 
new section:

``SEC. 27. <<NOTE: 15 USC 77z-1.>> PRIVATE SECURITIES LITIGATION.

    ``(a) Private Class Actions.--
            ``(1) In general.--The provisions of this subsection shall 
        apply to each private action arising under this title that is 
        brought as a plaintiff class action pursuant to the Federal 
        Rules of Civil Procedure.
            ``(2) Certification filed with complaint.--

[[Page 109 STAT. 738]]

                    ``(A) In general.--Each plaintiff seeking to serve 
                as a representative party on behalf of a class shall 
                provide a sworn certification, which shall be personally 
                signed by such plaintiff and filed with the complaint, 
                that--
                          ``(i) states that the plaintiff has reviewed 
                      the complaint and authorized its filing;
                          ``(ii) states that the plaintiff did not 
                      purchase the security that is the subject of the 
                      complaint at the direction of plaintiff's counsel 
                      or in order to participate in any private action 
                      arising under this title;
                          ``(iii) states that the plaintiff is willing 
                      to serve as a representative party on behalf of a 
                      class, including providing testimony at deposition 
                      and trial, if necessary;
                          ``(iv) sets forth all of the transactions of 
                      the plaintiff in the security that is the subject 
                      of the complaint during the class period specified 
                      in the complaint;
                          ``(v) identifies any other action under this 
                      title, filed during the 3-year period preceding 
                      the date on which the certification is signed by 
                      the plaintiff, in which the plaintiff has sought 
                      to serve, or served, as a representative party on 
                      behalf of a class; and
                          ``(vi) states that the plaintiff will not 
                      accept any payment for serving as a representative 
                      party on behalf of a class beyond the plaintiff's 
                      pro rata share of any recovery, except as ordered 
                      or approved by the court in accordance with 
                      paragraph (4).
                    ``(B) Nonwaiver of attorney-client privilege.--The 
                certification filed pursuant to subparagraph (A) shall 
                not be construed to be a waiver of the attorney-client 
                privilege.
            ``(3) Appointment of lead plaintiff.--
                    ``(A) Early notice to class members.-- 
                <<NOTE: Publication.>> 
                          ``(i) In general.--Not later than 20 days 
                      after the date on which the complaint is filed, 
                      the plaintiff or plaintiffs shall cause to be 
                      published, in a widely circulated national 
                      business-oriented publication or wire service, a 
                      notice advising members of the purported plaintiff 
                      class--
                                    ``(I) of the pendency of the action, 
                                the claims asserted therein, and the 
                                purported class period; and
                                    ``(II) that, not later than 60 days 
                                after the date on which the notice is 
                                published, any member of the purported 
                                class may move the court to serve as 
                                lead plaintiff of the purported class.
                          ``(ii) Multiple actions.--If more than one 
                      action on behalf of a class asserting 
                      substantially the same claim or claims arising 
                      under this title is filed, only the plaintiff or 
                      plaintiffs in the first filed action shall be 
                      required to cause notice to be published in 
                      accordance with clause (i).
                          ``(iii) Additional notices may be required 
                      under federal rules.--Notice required under clause 
                      (i) shall be in addition to any notice required 
                      pursuant to the Federal Rules of Civil Procedure.
                    ``(B) Appointment of lead plaintiff.--

[[Page 109 STAT. 739]]

                          ``(i) In general.--Not later than 90 days 
                      after the date on which a notice is published 
                      under subparagraph (A)(i), the court shall 
                      consider any motion made by a purported class 
                      member in response to the notice, including any 
                      motion by a class member who is not individually 
                      named as a plaintiff in the complaint or 
                      complaints, and shall appoint as lead plaintiff 
                      the member or members of the purported plaintiff 
                      class that the court determines to be most capable 
                      of adequately representing the interests of class 
                      members (hereafter in this paragraph referred to 
                      as the `most adequate plaintiff') in accordance 
                      with this subparagraph.
                          ``(ii) Consolidated actions.--If more than one 
                      action on behalf of a class asserting 
                      substantially the same claim or claims arising 
                      under this title has been filed, and any party has 
                      sought to consolidate those actions for pretrial 
                      purposes or for trial, the court shall not make 
                      the determination required by clause (i) until 
                      after the decision on the motion to consolidate is 
                      rendered. As soon as practicable after such 
                      decision is rendered, the court shall appoint the 
                      most adequate plaintiff as lead plaintiff for the 
                      consolidated actions in accordance with this 
                      subparagraph.
                          ``(iii) Rebuttable presumption.--
                                    ``(I) In general.--Subject to 
                                subclause (II), for purposes of clause 
                                (i), the court shall adopt a presumption 
                                that the most adequate plaintiff in any 
                                private action arising under this title 
                                is the person or group of persons that--
                                            ``(aa) has either filed the 
                                        complaint or made a motion in 
                                        response to a notice under 
                                        subparagraph (A)(i);
                                            ``(bb) in the determination 
                                        of the court, has the largest 
                                        financial interest in the relief 
                                        sought by the class; and
                                            ``(cc) otherwise satisfies 
                                        the requirements of Rule 23 of 
                                        the Federal Rules of Civil 
                                        Procedure.
                                    ``(II) Rebuttal evidence.--The 
                                presumption described in subclause (I) 
                                may be rebutted only upon proof by a 
                                member of the purported plaintiff class 
                                that the presumptively most adequate 
                                plaintiff--
                                            ``(aa) will not fairly and 
                                        adequately protect the interests 
                                        of the class; or
                                            ``(bb) is subject to unique 
                                        defenses that render such 
                                        plaintiff incapable of 
                                        adequately representing the 
                                        class.
                          ``(iv) Discovery.--For purposes of this 
                      subparagraph, discovery relating to whether a 
                      member or members of the purported plaintiff class 
                      is the most adequate plaintiff may be conducted by 
                      a plaintiff only if the plaintiff first 
                      demonstrates a reasonable basis for a finding that 
                      the presumptively most adequate plaintiff is 
                      incapable of adequately representing the class.

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                          ``(v) Selection of lead counsel.--The most 
                      adequate plaintiff shall, subject to the approval 
                      of the court, select and retain counsel to 
                      represent the class.
                          ``(vi) Restrictions on professional 
                      plaintiffs.--Except as the court may otherwise 
                      permit, consistent with the purposes of this 
                      section, a person may be a lead plaintiff, or an 
                      officer, director, or fiduciary of a lead 
                      plaintiff, in no more than 5 securities class 
                      actions brought as plaintiff class actions 
                      pursuant to the Federal Rules of Civil Procedure 
                      during any 3-year period.
            ``(4) Recovery by plaintiffs.--The share of any final 
        judgment or of any settlement that is awarded to a 
        representative party serving on behalf of a class shall be 
        equal, on a per share basis, to the portion of the final 
        judgment or settlement awarded to all other members of the 
        class. Nothing in this paragraph shall be construed to limit the 
        award of reasonable costs and expenses (including lost wages) 
        directly relating to the representation of the class to any 
        representative party serving on behalf of the class.
            ``(5) Restrictions on settlements under seal.--The terms and 
        provisions of any settlement agreement of a class action shall 
        not be filed under seal, except that on motion of any party to 
        the settlement, the court may order filing under seal for those 
        portions of a settlement agreement as to which good cause is 
        shown for such filing under seal. For purposes of this 
        paragraph, good cause shall exist only if publication of a term 
        or provision of a settlement agreement would cause direct and 
        substantial harm to any party.
            ``(6) Restrictions on payment of attorneys' fees and 
        expenses.--Total attorneys' fees and expenses awarded by the 
        court to counsel for the plaintiff class shall not exceed a 
        reasonable percentage of the amount of any damages and 
        prejudgment interest actually paid to the class.
            ``(7) Disclosure of settlement terms to class members.--Any 
        proposed or final settlement agreement that is published or 
        otherwise disseminated to the class shall include each of the 
        following statements, along with a cover page summarizing the 
        information contained in such statements:
                    ``(A) Statement of plaintiff recovery.--The amount 
                of the settlement proposed to be distributed to the 
                parties to the action, determined in the aggregate and 
                on an average per share basis.
                    ``(B) Statement of potential outcome of case.--
                          ``(i) Agreement on amount of damages.--If the 
                      settling parties agree on the average amount of 
                      damages per share that would be recoverable if the 
                      plaintiff prevailed on each claim alleged under 
                      this title, a statement concerning the average 
                      amount of such potential damages per share.
                          ``(ii) Disagreement on amount of damages.--If 
                      the parties do not agree on the average amount of 
                      damages per share that would be recoverable if the 
                      plaintiff prevailed on each claim alleged under 
                      this title, a statement from each settling party 
                      concerning the issue or issues on which the 
                      parties disagree.

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                          ``(iii) Inadmissibility for certain 
                      purposes.--A statement made in accordance with 
                      clause (i) or (ii) concerning the amount of 
                      damages shall not be admissible in any Federal or 
                      State judicial action or administrative 
                      proceeding, other than an action or proceeding 
                      arising out of such statement.
                    ``(C) Statement of attorneys' fees or costs 
                sought.--If any of the settling parties or their counsel 
                intend to apply to the court for an award of attorneys' 
                fees or costs from any fund established as part of the 
                settlement, a statement indicating which parties or 
                counsel intend to make such an application, the amount 
                of fees and costs that will be sought (including the 
                amount of such fees and costs determined on an average 
                per share basis), and a brief explanation supporting the 
                fees and costs sought.
                    ``(D) Identification of lawyers' representatives.--
                The name, telephone number, and address of one or more 
                representatives of counsel for the plaintiff class who 
                will be reasonably available to answer questions from 
                class members concerning any matter contained in any 
                notice of settlement published or otherwise disseminated 
                to the class.
                    ``(E) Reasons for settlement.--A brief statement 
                explaining the reasons why the parties are proposing the 

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