House Financial Services Committee Holds Hearing on H.R. 5491

The Capital Markets, Insurance and Government-Sponsored Enterprises Subcommittee of the House Financial Services Committee held a hearing on June 28, 2006 on H.R. 5491, a bill entitled the "Securities Litigation Attorney Accountability and Transparency Act," that would amend the PSLRA.  Lyle Roberts of The 10b-5 Daily reports that the key provisions of the bill would:

(1) allow a prevailing defendant to argue to the court that the plaintiff's attorney should pay the prevailing defendant's fees and expenses because the "position of the plaintiff was not substantially justified;"

(2) require disclosure to the court of any conflict of interest between a plaintiff and his attorney and permit the court to disqualify the attorney if necessary; and

(3) permit courts to approve lead counsel in securities class actions through "alternative means," including a competitive bidding process.

Among the witnesses who appeared before the Subcommittee, Chief Judge Vaughn R. Walker of the Northern District of California and Theodore H. Frank of the American Enterprise Institute spoke in favor of the legislation, while Duke Law School Professor James D. Cox opposed the bill.  Their prepared testimony to the Subcommittee appears here.  The excellent albeit partisan blog Point of Law has two posts on the hearing here and here.

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