Effect on 10b-5 Damages of the 1995 Private Securities Litigation Reform Act: A Forward-Looking Assessment

Sun Sep 01 16:58:37 EDT 1996
Dr. Marcia Kramer Mayer with Gibson, Dunn & Crutcher Partner Jonathan Dickey

The new "bounce-back" rule limits 10b-5 damages in cases where the stock price recovers after the corrective disclosure. This article illustrates how the rule works and notes ambiguities in its application. The empirical analysis suggests that, except perhaps in bull markets, the damages cap will have little or no effect in most shareholder class actions.

This research was published in Business Lawyer, Vol. 51, August 1996.