Since the beginning of 2025, U.S. policymakers have been systematically rolling back investors ability to challenge corporate misconduct. The SEC has purported to limit institutional investors’ ability to propose matters for a shareholder vote, to engage directly with management on issues of concern, and even to access the courts to seek relief for fraud. In the race to attract more corporations to their jurisdictions, states such as Delaware, Texas, and Nevada have dramatically limited shareholders’ rights to govern corporations organized there.
Taken together, these policy shifts seek to immunize corporations from accountability to their shareholders. If history teaches us anything, this trend is a recipe for disaster. And it ignores a core tenet of America’s financial markets: investors serve as a critical check on corporate power. One need not be intimately familiar with the market debacles of 1929, 1987, 2000, or 2008 to recognize the wisdom in Sir Edmund Burke’s obvious, yet poignant observation that those who don’t know history are destined to repeat it.
The PSLRA and Immunity for Corporate Fraud
In 1995, Congress enacted the Private Securities Litigation Reform Act (“PSLRA”) to empower institutional investors to hold corporate fraudsters accountable while limiting weak lawsuits. The new law tightened pleading standards, limited discovery before resolution of a motion to dismiss, and added a safe harbor for issuers. The PSLRA also created a lead plaintiff selection process expressly to “increase the likelihood that institutional investors will serve as lead plaintiffs,” aligning litigation with the interests of those who have “the largest financial stake” in the outcome. Critically, institutional investors were encouraged to no longer rely exclusively on government regulators for relief, but rather lead securities class actions as they were deemed “an essential supplement to criminal prosecutions and civil enforcement actions.” Subsequent decisions by the U.S. Supreme Court, such as Amgen and Halliburton II, kept the courthouse doors open for investors to check corporate fraud.
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