Q5: Why Do We Need These Actions At All?
A5: Several reasons. First, we need honest markets. These class actions are so feared in the corporate suites that most executives think twice before putting out an unfounded bullish statement or a questionable financial report. Without honest markets, fraud will run rampant, and investors will shy away from the equity markets, leaving honest companies hard-pressed to raise funds in the capital markets, or having to pay prices for capital that would inhibit growth. Investors flock to the US equity markets because the markets here are believed to be honest. Indeed, the securities were passed in reaction to the manipulations, frauds and excesses which played no small part in bringing about the Crash of 1929. Second, many actions, contrary to popular belief, do result in substantial recoveries. Third, the SEC simply does not have the money and manpower to police the entire market; SEC officials have said as much. Private actions provide a very necessary supplement to what the SEC can do. Fourth, we need these actions because it is just wrong to allow those who have no respect for the truth to get away scot-free, never having to answer to those "faceless" individuals they were all too happy to mislead when it suited their purposes.
That's my view. Let the great debate begin! |
