I 

109TH CONGRESS 

2D SESSION H. R. 5491 

To protect investors by fostering transparency and accountability of attorneys 

in private securities litigation. 

IN THE HOUSE OF REPRESENTATIVES 

MAY 25, 2006 

Mr. BAKER (for himself, Mr. MCHENRY, and Mr. HENSARLING) introduced 

the following bill; which was referred to the Committee on Financial Services, and in addition to the Committee on the Judiciary, for a period to 

be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee 

concerned 

A BILL 

To protect investors by fostering transparency and 

accountability of attorneys in private securities litigation. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘Securities Litigation 

5 Attorney Accountability and Transparency Act’’. 

6 SEC. 2. LOSING PLAINTIFF’S ATTORNEY PAYS. 

7 (a) SECURITIES EXCHANGE ACT OF 1934.—Section 

8 21D(c) of the Securities Exchange Act of 1934 (15 U.S.C. 


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1 78u–4(c)) is amended by adding at the end the following 

2 new paragraph: 

3 ‘‘(4) ASSESSMENT OF FEES AND EXPENSES.— 

4 ‘‘(A) DETERMINATION REQUIRED.—If the 

5 court in any private action arising under this 

6 title enters a final judgment against a plaintiff 

7 on the basis of a motion to dismiss, motion for 

8 summary judgment, or a trial on the merits, 

9 the court shall, upon motion by the defendant, 

10 determine whether— 

11 ‘‘(i) the position of the plaintiff was 

12 not substantially justified; 

13 ‘‘(ii) imposing fees and expenses on 

14 the plaintiff’s attorney would be just; and 

15 ‘‘(iii) the cost of such fees and ex16 penses to the defendant is substantially 

17 burdensome or unjust. 

18 ‘‘(B) AWARD.—If the court makes the de19 terminations described in clauses (i), (ii), and 

20 (iii) of subparagraph (A), the court shall award 

21 the defendant reasonable fees and other ex22 penses incurred by the defendant and impose 

23 such fees and expenses on the plaintiff’s attor24 ney. 


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1 ‘‘(C) BASIS OF DETERMINATION REGARD2 ING POSITION; BURDEN OF PERSUASION.—The 

3 determination of whether the position of the 

4 plaintiff was substantially justified shall be 

5 made on the basis of the record in the action 

6 for which fees and other expenses are sought, 

7 but the burden of persuasion shall be on the de8 fendant.’’. 

9 (b) SECURITIES ACT OF 1933.—Section 27(c) of the 

10 Securities Act of 1933 (15 U.S.C. 77z–1(c)) is amended 

11 by adding at the end the following new paragraph: 

12 ‘‘(4) ASSESSMENT OF FEES AND EXPENSES.— 

13 ‘‘(A) DETERMINATION REQUIRED.—If the 

14 court in any private action arising under this 

15 title enters a final judgment against a plaintiff 

16 on the basis of a motion to dismiss, motion for 

17 summary judgment, or a trial on the merits, 

18 the court shall, upon motion by the defendant, 

19 determine whether— 

20 ‘‘(i) the position of the plaintiff was 

21 not substantially justified; 

22 ‘‘(ii) imposing fees and expenses on 

23 the plaintiff’s attorney would be just; and 


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1 ‘‘(iii) the cost of such fees and ex2 penses to the defendant is substantially 

3 burdensome or unjust. 

4 ‘‘(B) AWARD.—If the court makes the de5 terminations described in clauses (i), (ii), and 

6 (iii) of subparagraph (A), the court shall award 

7 the defendant reasonable fees and other ex8 penses incurred by the defendant and impose 

9 such fees and expenses on the plaintiff’s attor10 ney. 

11 ‘‘(C) BASIS OF DETERMINATION REGARD12 ING POSITION; BURDEN OF PERSUASION.—The 

13 determination of whether the position of the 

14 plaintiff was substantially justified shall be 

15 made on the basis of the record in the action 

16 for which fees and other expenses are sought, 

17 but the burden of persuasion shall be on the de18 fendant.’’. 

19 SEC. 3. DISCLOSURES OF CONFLICTS OF INTEREST BE20 TWEEN PLAINTIFF AND ATTORNEYS. 

21 (a) SECURITIES EXCHANGE ACT OF 1934.—Section 

22 21D(a) of the Securities Exchange Act of 1934 (15 U.S.C. 

23 78u–4(a)) is amended by adding at the end the following 

24 new paragraph: 


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1 ‘‘(10) DISCLOSURES REGARDING CONFLICTS OF

2 INTEREST.—In any private action arising under this 

3 title, each plaintiff and any attorney for such plain4 tiff shall provide sworn certifications, which shall be 

5 personally signed by such plaintiff and such attor6 ney, respectively, and filed with the complaint, that 

7 identifies any conflict of interest, including any di8 rect or indirect payment, between such attorney and 

9 such plaintiff and between such attorney and any af10 filiated person of such plaintiff. The court shall 

11 make a determination of whether such conflict is 

12 sufficient to disqualify the attorney from rep13 resenting the plaintiff.’’. 

14 (b) SECURITIES ACT OF 1933.—Section 27(a) of the 

15 Securities Act of 1933 (15 U.S.C. 77z–1(a)) is amended 

16 by adding at the end the following new paragraph: 

17 ‘‘(10) DISCLOSURES REGARDING CONFLICTS OF

18 INTEREST.—In any private action arising under this 

19 title, each plaintiff and any attorney for such plain20 tiff shall provide sworn certifications, which shall be 

21 personally signed by such plaintiff and such attor22 ney, respectively, and filed with the complaint, that 

23 identifies any conflict of interest, including any di24 rect or indirect payment, between such attorney and 

25 such plaintiff and between such attorney and any afVerDate Aug 31 2005 04:29 Jun 01, 2006 Jkt 049200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\H5491.IH H5491

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1 filiated person (as such term is defined in section 

2 2(a)(3) of the Investment Company Act of 1940 (15 

3 U.S.C. 80a–3(a)(3))) of such plaintiff. The court 

4 shall make a determination of whether such conflict 

5 is sufficient to disqualify the attorney from rep6 resenting the plaintiff.’’. 

7 SEC. 4. SELECTION OF LEAD COUNSEL. 

8 (a) SECURITIES EXCHANGE ACT OF 1934.—Section 

9 21D(a)(3)(B)(v) of the Securities Exchange Act of 1934 

10 (15 U.S.C. 78u–4(a)(3)(B)(v)) is amended by adding at 

11 the end the following: ‘‘In exercising the discretion of the 

12 court over the approval of lead counsel, the court may em13 ploy alternative means in the selection and retention of 

14 counsel for the most adequate plaintiff, including a com15 petitive bidding process.’’. 

16 (b) SECURITIES ACT OF 1933.—Section 

17 27(a)(3)(B)(v) of the Securities Act of 1933 (15 U.S.C. 

18 77z–1(a)(3)(B)(v)) is amended by adding at the end the 

19 following: ‘‘In exercising the discretion of the court over 

20 the approval of lead counsel, the court may employ alter21 native means in the selection and retention of counsel for 

22 the most adequate plaintiff, including a competitive bid23 ding process.’’. 

Æ 


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