Legal Remedies Harder to Come By

Tidal Pools

Still, it's difficult to draw too many conclusions from these statistics because the past two years have presented an unusually fertile breeding ground for securities fraud cases and to some extent may be exaggerating the statistics. With so many stocks getting crushed and corporations being investigated for accounting fraud, legal observers say the current climate is one that lends itself to more litigation and bigger settlements.

"It's very difficult to attribute the large settlements we've seen to the reform act because of the changed market conditions," says Laura Simmons, a senior manager with Cornerstone Research. "In order to draw a more rigid conclusion we may need a longer time horizon."

And it's worth remembering that shareholder litigation, both before and after the 1995 law, has never come close to making investors whole. Several studies have shown that the dollar value of settlements in securities fraud cases represent around 5% of the actual damages incurred by shareholders.

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