I 

110TH CONGRESS 

2D SESSION H. R. 5463 

To protect investors by fostering transparency and accountability of attorneys 

in private securities litigation. 

IN THE HOUSE OF REPRESENTATIVES 

FEBRUARY 14, 2008 

Mr. HENSARLING (for himself and Mr. ROYCE) 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 PAYMENTS, FEE ARRANGEMENTS, 

20 CONTRIBUTIONS, AND OTHER POTENTIAL 

21 CONFLICTS OF INTEREST BETWEEN PLAIN22 TIFF AND ATTORNEYS. 

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

24 21D(a) of the Securities Exchange Act of 1934 (15 U.S.C. 


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

2 new paragraphs: 

3 ‘‘(10) DISCLOSURES REGARDING PAYMENTS.— 

4 ‘‘(A) SWORN CERTIFICATIONS RE5 QUIRED.—In any private action arising under 

6 this title, each plaintiff and any attorney for 

7 such plaintiff shall provide sworn certifications, 

8 which shall be personally signed by such plain9 tiff and such attorney, respectively, and filed 

10 with the complaint, that identify any direct or 

11 indirect payment, or promise of any payment, 

12 by such attorney, or any person affiliated with 

13 such attorney, to such plaintiff, or any person 

14 affiliated with such plaintiff, beyond the plain15 tiff’s pro rata share of any recovery, except as 

16 ordered or approved by the court in accordance 

17 with paragraph (4). Upon disclosure of any 

18 such payment or promise of payment, the court 

19 shall disqualify the attorney from representing 

20 the plaintiff. 

21 ‘‘(B) DEFINITION.—For purposes of this 

22 paragraph, the term ‘payment’ shall include the 

23 transfer of money and any other thing of value, 

24 including the provision of services, other than 


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1 representation of the plaintiff in the private ac2 tion arising under this title. 

3 ‘‘(11) DISCLOSURES REGARDING LEGAL REP4 RESENTATIONS.—In any private action arising 

5 under this title, each plaintiff and any attorney for 

6 such plaintiff shall provide sworn certifications, 

7 which shall be personally signed by such plaintiff 

8 and such attorney, respectively, and filed with the 

9 complaint, that identifies the nature and terms of 

10 any legal representation provided by such attorney, 

11 or any person affiliated with such attorney, to such 

12 plaintiff, or any person affiliated with such plaintiff 

13 other than the representation of the plaintiff in the 

14 private action arising under this title. The court may 

15 allow such certifications to be made under seal. The 

16 court shall make a determination whether the nature 

17 or terms of the fee arrangement for any other mat18 ter influenced the selection and retention of counsel 

19 in any private action arising under this title and, if 

20 the court so finds, shall disqualify the attorney from 

21 representing the plaintiff in any such action. 

22 ‘‘(12) DISCLOSURES REGARDING CONTRIBU23 TIONS.—In any private action arising under this 

24 title, each plaintiff and any attorney for such plain25 tiff shall provide sworn certifications, which shall be 


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1 personally signed by such plaintiff and such attor2 ney, respectively, and filed with the complaint, that 

3 identifies any contribution made within five years 

4 prior to the filing of the complaint by such attorney, 

5 any person affiliated with such attorney, or any po6 litical action committee controlled by such attorney, 

7 to any elected official with authority to retain coun8 sel for such plaintiff or to select or appoint, influ9 ence the selection or appointment of, or oversee any 

10 individual or group of individuals with that author11 ity. 

12 ‘‘(13) DISCLOSURE REGARDING OTHER CON13 FLICTS OF INTEREST.—In any private action arising 

14 under this title, each plaintiff and any attorney for 

15 such plaintiff shall provide sworn certifications, 

16 which shall be personally signed by such plaintiff 

17 and such attorney, respectively, and filed with the 

18 complaint, that identifies any other conflict of inter19 est (other than one specified in paragraphs (10) 

20 through (12)) between such attorney and such plain21 tiff. The court shall make a determination of wheth22 er such conflict is sufficient to disqualify the attor23 ney from representing the plaintiff.’’. 


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

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

3 by adding at the end the following new paragraph: 

4 ‘‘(10) DISCLOSURES REGARDING PAYMENTS.— 

5 ‘‘(A) SWORN CERTIFICATIONS RE6 QUIRED.—In any private action arising under 

7 this title, each plaintiff and any attorney for 

8 such plaintiff shall provide sworn certifications, 

9 which shall be personally signed by such plain10 tiff and such attorney, respectively, and filed 

11 with the complaint, that identify any direct or 

12 indirect payment, or promise of any payment, 

13 by such attorney, or any person affiliated with 

14 such attorney, to such plaintiff, or any person 

15 affiliated with such plaintiff, beyond the plain16 tiff’s pro rata share of any recovery, except as 

17 ordered or approved by the court in accordance 

18 with paragraph (4). Upon disclosure of any 

19 such payment or promise of payment, the court 

20 shall disqualify the attorney from representing 

21 the plaintiff. 

22 ‘‘(B) DEFINITION.—For purposes of this 

23 paragraph, the term ‘payment’ shall include the 

24 transfer of money and any other thing of value, 

25 including the provision of services, other than 


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1 representation of the plaintiff in the private ac2 tion arising under this title. 

3 ‘‘(11) DISCLOSURES REGARDING LEGAL REP4 RESENTATIONS.—In any private action arising 

5 under this title, each plaintiff and any attorney for 

6 such plaintiff shall provide sworn certifications, 

7 which shall be personally signed by such plaintiff 

8 and such attorney, respectively, and filed with the 

9 complaint, that identifies the nature and terms of 

10 any legal representation provided by such attorney, 

11 or any person affiliated with such attorney, to such 

12 plaintiff, or any person affiliated with such plaintiff 

13 other than the representation of the plaintiff in the 

14 private action arising under this title. The court may 

15 allow such certifications to be made under seal. The 

16 court shall make a determination whether the nature 

17 or terms of the fee arrangement for any other mat18 ter influenced the selection and retention of counsel 

19 in any private action arising under this title and, if 

20 the court so finds, shall disqualify the attorney from 

21 representing the plaintiff in any such action. 

22 ‘‘(12) DISCLOSURES REGARDING CONTRIBU23 TIONS.—In any private action arising under this 

24 title, each plaintiff and any attorney for such plain25 tiff shall provide sworn certifications, which shall be 


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1 personally signed by such plaintiff and such attor2 ney, respectively, and filed with the complaint, that 

3 identifies any contribution made within five years 

4 prior to the filing of the complaint by such attorney, 

5 any person affiliated with such attorney, or any po6 litical action committee controlled by such attorney, 

7 to any elected official with authority to retain coun8 sel for such plaintiff or to select or appoint, influ9 ence the selection or appointment of, or oversee any 

10 individual or group of individuals with that author11 ity. 

12 ‘‘(13) DISCLOSURE REGARDING OTHER CON13 FLICTS OF INTEREST.—In any private action arising 

14 under this title, each plaintiff and any attorney for 

15 such plaintiff shall provide sworn certifications, 

16 which shall be personally signed by such plaintiff 

17 and such attorney, respectively, and filed with the 

18 complaint, that identifies any other conflict of inter19 est (other than one specified in paragraphs (10) 

20 through (12)) between such attorney and such plain21 tiff. The court shall make a determination of wheth22 er such conflict is sufficient to disqualify the attor23 ney from representing the plaintiff.’’. 


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1 SEC. 4. SELECTION OF LEAD COUNSEL. 

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

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

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

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

6 court over the approval of lead counsel, the court shall 

7 employ a competitive bidding process as one of the criteria 

8 in the selection and retention of counsel for the most ade9 quate plaintiff, unless the court determines on the record 

10 that such a process is not feasible.’’. 

11 (b) SECURITIES ACT OF 1933.—Section 

12 27(a)(3)(B)(v) of the Securities Act of 1933 (15 U.S.C. 

13 77z–1(a)(3)(B)(v)) is amended by adding at the end the 

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

15 the approval of lead counsel, the court shall employ a com16 petitive bidding process as one of the criteria in the selec17 tion and retention of counsel for the most adequate plain18 tiff, unless the court determines on the record that such 

19 a process is not feasible.’’. 

20 SEC. 5. STUDY OF AVERAGE HOURLY FEES IN SECURITIES 

21 CLASS ACTIONS. 

22 (a) STUDY AND REVIEW REQUIRED.—The Comp23 troller General of the United States shall conduct a study 

24 and review of fee awards to lead counsel in securities class 

25 actions over the five years preceding the date of enactment 


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1 of this Act to determine the effective average hourly rate 

2 for lead counsel in such actions. 

3 (b) REPORT REQUIRED.—Not later than 1 year after 

4 the date of enactment of this Act, the Comptroller General 

5 shall submit a report to the Committee on Banking, Hous6 ing, and Urban Affairs of the Senate and the Committee 

7 on Financial Services of the House of Representatives on 

8 the results of the study and review required by this sec9 tion. The Comptroller General shall submit an updated 

10 study every three years thereafter. 

11 (c) DEFINITION.—For purposes of this section, the 

12 term ‘‘securities class action’’ means a private class action 

13 arising under the Securities Act of 1933 (15 U.S.C. 77 

14 et seq.) or the Securities Exchange Act of 1934 (15 U.S.C. 

15 78 et seq.) that is brought as a plaintiff class action pur16 suant to the Federal Rules of Civil Procedure. 

Æ 


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