This has been an unusual year for securities litigators. While the economic crisis has led to new case filings in the first six months of 2009, the cases are largely focused on the financial sector and address subjects related to the lost value of assets backed by subprime and other debt. In addition, a significant number of the cases stem from the Madoff scandal. According to Kevin LaCroix, writing for the blog “D&O Diary, with many filings this year involving different classes of related securities and with various overlapping suits in the Madoff litigation, the process of identifying distinct cases “was extraordinarily complicated.” The number of more traditional securities fraud cases involving allegations of accounting fraud dropped off during the first half of the year. While this column does not make any predictions, based on early third-quarter filings, LaCroix predicts traditional securities cases outside the financial sector, including accounting fraud cases, will be filed in greater numbers during the remainder of the year.

But this recent “lull” in traditional securities fraud filings gives rise to an opportunity to reflect on the purpose of the federal securities laws in order to focus on the values that they were enacted to protect and promote. When enacting the Securities Exchange Act of 1934, Congress intended to legislate values of honesty and integrity because those values were deemed essential to the proper functioning of the U.S. capital markets. This column contends that institutional investors seeking to serve as lead plaintiffs in securities class actions are best suited to, and do, effectuate the values inherent in the federal securities laws.

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