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65 Fla. L. Rev. Forum 1 (2013)

handle is hein.journals/flrf65 and id is 1 raw text is: SECURITIES ENFORCEMENT IN EXTRAORDINARY TIMES: A COMMENT ON ROSE AND LEBLANC'S POLICING PUBLIC COMPANIES James J. Park* In Policing Public Companies, I Professors Amanda M. Rose and Larry J. LeBlanc compile and analyze an impressive dataset of securities litigation against public companies from 2004 through 2006, a period soon after the collapse of the internet bubble, the Enron and WorldCom accounting frauds, and the rise of New York Attorney General Eliot Spitzer. Their results provide evidence that public companies are at significant risk of litigation brought pursuant to the securities laws. However, because the period of the study reflects the aftermath of unprecedented securities enforcement activity, its results are likely not representative of enforcement activity in normal times. In perhaps the most comprehensive effort of documenting securities litigation against public companies to date, Rose and LeBlanc examined 5,441 10-Ks filed by 1,977 public companies from 2004 through 2006.2 For each of these filings, they recorded whether Item 3, which requires disclosure of material litigation, described securities litigation against the company. Rose and LeBlanc classify public enforcement actions by the SEC and state attorneys general, private securities class actions, regulatory actions by SROs, and state derivative law suits as securities litigation. They found that of the public companies in their database, 27% disclosed some form of securities litigation with 56% of those companies facing two or more suits.4 Rose and LeBlanc's data confirm the intuition that public companies are likely to face some form of securities litigation. The more difficult question is whether such suits are warranted. The period from 2004 to 2006 likely included pending cases against companies such as Enron, WorldCom, Tyco, Adelphia, Global Crossing, and AIG. A high percentage of companies were the subject of securities litigation, in part, because many companies acted questionably in the period prior to and during the time of the study. Of course, some of the suits recorded by Rose and LeBlanc were likely without merit, but courts have ways of dealing with frivolous suits. Prior studies show that courts dismiss about * Professor of Law, UCLA School of Law. 1. Amanda M. Rose & Larry J. LeBlanc, Policing Public Companies: An Empirical Examination of the Enforcement Landscape and the Role Played by State Securities Regulators, 65 FLA. L. REv. 395, 398 (2013). 2. Id. at 398. 3. Id. at 408-09. 4. Id. at 398.

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