The End of Securities Fraud Class Action?

Abstract

The purpose of securities law is to protect reasonable investors. Reasonable investors diversify. A diversified investor is protected against simple securities fraud by being diversified and needs no remedy at law. Moreover, the cost of litigating a securities fraud class action is a deadweight loss. Thus, diversified investors are not merely indifferent to securities litigation; diversified investors should be opposed to private actions for damages based on securities fraud unless insiders have extracted a gain.

Keywords: Richard A. Booth, securities law, reasonable investors, protection, diversified investors, simple securities fraud, SFCA, securities fraud, disclosure, insider trading

JEL Classification: E51, F13, G11, G14, G18, G19, G28