Wednesday, April 29, 1998
Prepared Statement of U.S. Senator Alfonse M. D'Amato
Regarding the Mark-Up of S.1260, The Securities Litigation Uniform Standards Act

"The Committee now turns its attention to S.1260, the "Securities Litigation Uniform Standards Act." At the outset, I would like to alert Committee Members to important correspondence from the SEC and the White House regarding the substitute amendment that we will consider today.  The SEC endorses the legislative package that we are considering today. The second letter is from the White House and expresses the Administration's support.

"I mention these two letters because they are evidence of the hard work that Senators Gramm and Dodd have put into developing a consensus on this bill. They have both worked tirelessly to craft a bill with strong bipartisan support. The end result is a substitute that is even stronger than the original bill.

"The legislation that this Committee will consider today completes the work started in 1995. In 1995, this Committee reported, and Congress enacted, comprehensive securities litigation reform. We did so in response to a wave of harassment litigation that was accomplishing little in the way of investor protection, but was threatening the ability of companies, particularly "high-tech" companies, to raise and retain necessary capital for research, development and growth.

"The bill will close a loophole in the law that has permitted harassment litigation to be continued in state courts. First, let me clarify some misunderstandings about this bill. This legislation is narrowly focused. It will apply only to "national" securities that are traded on National exchanges and on NASDAQ's National Market System. Second, it will not block injured individual plaintiffs from seeking their day in court. Under the bill, State enforcement actions or shareholder derivative suits will remain available as remedies for fraud and misconduct. It will not block actions against rogue brokers or microcap scam artists. Let me emphasize the focus of this bill -- to protect widely-held and traded companies from meaningless lawsuits that have nothing to do with shareholder protection, and facilitate capital investment and enhance the liquidity of our capital markets.

"The Committee has before it an amendment in the nature of a substitute that is co-sponsored by Senators Gramm, Dodd and myself. This amendment revises S.1260 to conform with the changes that were agreed to with the SEC. Specifically the substitute amendment makes the following changes:

"First, the substitute addresses the so-called "Delaware" problem. As originally drafted the bill would have blocked certain shareholder lawsuits against directors for breach of the fiduciary duty of disclosure under state laws. Such laws have traditionally been used by shareholders in the context of corporate takeovers. The Delaware chancery courts in particular have a great deal of experience in resolving these cases expeditiously. The agreed-to language exempts this important shareholder protection tool.

"Second, the substitute amendment tightens up the definition of "class action." The amendments that were agreed to will allow certain actions that are beyond the scope of this bill (such as suits against "rogue brokers") to proceed in state court. The amendments will also allow so-called "mass actions" to be removed to Federal Court.

"I hope we can report this bill without amendment, and with a strong bipartisan vote."