The Private Securities Litigation Reform Act of 1995 got its start as a subclause in the Contract with America. Congress overrode a veto by President Bill Clinton to pass it.
Has it panned out? The WSJ cast light on the question today.
The item focused on how much some class action law firms give to the campaigns of candidates for state and local political offices. The article suggested a link between the contributions and the firms' ability to land securities class action work:
Public pension funds increasingly are the lead plaintiffs in shareholder suits, partly because a federal law encourages judges to pick big institutional investors for this role.
As a result, plaintiffs' law firms focus their marketing efforts on wooing public pension funds and the state and local officials who influence them. Some firms enlist the help of lobbyists and attend pension-fund conferences.
The "federal law that encourages judges to pick big institutional investors" for the lead plaintiff role? The PSLRA, of course.
Section 78u-4(a)(3)(B)(iii)(I)(bb) created a "presumption" in favor of appointing the investor or investor group that "has the largest financial interest in the relief sought by the class". That often means funds that invest billions for employees of state and local governments.
Blawgletter doubts that the sponsors of the Contract with America intended the PSLRA to benefit public office holders and seekers who favor vigorous enforcement of federal securities laws.