SEC Says State Courts Used in Fraud Suits

Investor attorneys are increasingly using state courts to bring fraud lawsuits against companies in an apparent attempt to circumvent a new federal law, a Securities and Exchange Commission study found. The law, passed by Congress in December 1995 over President Clinton’s veto, seeks to curb frivolous class-action complaints by investors in federal court. The 80-page study, requested by Clinton and sent to the White House and Congress, said “many of the state cases are filed parallel to a federal court case in an apparent attempt to avoid some of the procedures imposed by the Reform Act.” The SEC split over whether the report suggests the need for legislative revisions to the 1995 Private Securities Litigation Reform Act. SEC Chairman Arthur Levitt said the study findings are too preliminary to shed light on possible legislation. Last week, 181 high-technology companies urged Congress to pass a bill halting use of state courts for fraud suits.