Sec. 1. Short title; table of contents.
Sec. 2. Elimination of certain abusive practices.
Sec. 3. Time limitation on private rights of action.
Sec. 4. Plaintiff steering committees.
Sec. 5. Requirements for securities fraud actions.
Sec. 6. Proportionate liability and joint and several liability.
Sec. 7. Safe harbor for forward-looking statements.
Sec. 8. Fraud detection and disclosure.
Sec. 9. Amendment to Racketeer Influenced and Corrupt Organizations Act.
SEC. 2. ELIMINATION OF CERTAIN ABUSIVE PRACTICES.
(a) RECEIPT FOR REFERRAL FEES.—Section 15(c)
of the Securities Exchange Act of 1934 (15 U.S.C. 78o(c))
is amended by adding at the end the following new para-
graph:
‘‘(7) RECEIPT OF REFERRAL FEES.—No broker
or dealer, or person associated with a broker or deal-
er, may solicit or accept remuneration for assisting
an attorney in obtaining the representation of any
customer in any implied private action arising under
this title.’’.
(b) PROHIBITION ON ATTORNEYS’ FEES PAID FROM
COMMISSION DISGORGEMENT FUNDS.—Section 21(d) of
the Securities Exchange Act of 1934 (15 U.S.C. 78u(d))
is amended by adding at the end the following new para-
graph:
‘‘(4) PROHIBITION ON ATTORNEYS’ FEES PAID
FROM COMMISSION DISGORGEMENT FUNDS.—Except
as otherwise ordered by the court, funds disgorged
as the result of an action brought by the Commis-
sion in Federal court, or of any Commission admin-
istrative action, shall not be distributed as payment
for attorneys’ fees or expenses incurred by private
parties seeking distribution of the disgorged funds.’’.
(c) ADDITIONAL PROVISIONS APPLICABLE TO CLASS
ACTIONS.—Section 21 of the Securities Exchange Act of
1934 (15 U.S.C. 78u) is amended by adding at the end
the following new subsections:
‘‘(i) RECOVERY BY NAMED PLAINTIFFS IN CLASS
ACTIONS.—In an implied private action arising under this
title that is certified as a class action pursuant to the Fed-
eral Rules of Civil Procedure, the share of any final judg-
ment or of any settlement that is awarded to class plain-
tiffs serving as the representative parties shall be cal-
culated in the same manner as the shares of the final judg-
ment or settlement awarded to all other members of the
class. Nothing in this subsection shall be construed to
limit the award to any representative parties of reasonable
compensation, costs, and expenses (including lost wages)
relating to the representation of the class.
‘‘(j) CONFLICTS OF INTEREST.—In an implied pri-
vate action arising under this title that is certified as a
class action pursuant to the Federal Rules of Civil Proce-
dure, if a party is represented by an attorney who directly
owns or otherwise has a beneficial interest in the securities
that are the subject of the litigation, the court shall make
a determination of whether such interest constitutes a con-
flict of interest sufficient to disqualify the attorney from
representing the party.
‘‘(k) RESTRICTIONS
ON
SETTLEMENTS
UNDER
SEAL.—In an implied private action arising under this
title that is certified as a class action pursuant to the Fed-
eral Rules of Civil Procedure, the terms and provisions
of any settlement agreement between any of the parties
shall not be filed under seal, except that on motion of any
of the parties to the settlement, the court may order filing
under seal for those portions of a settlement agreement
as to which good cause is shown for such filing under seal.
Good cause shall only exist if publication of a term or pro-
vision of a settlement agreement would cause direct and
substantial harm to any person.
‘‘(l) RESTRICTIONS ON PAYMENT OF ATTORNEYS’
FEES FROM SETTLEMENT FUNDS.—In an implied private
action arising under this title that is certified as a class
action pursuant to the Federal Rules of Civil Procedure,
attorneys’ fees awarded by the court to counsel for the
class shall be determined as a percentage of the amount
of damages and prejudgment interest actually paid to the
class as a result of the attorneys’ efforts. In no event shall
the amount awarded to counsel for the class exceed a rea-
sonable percentage of the amount recovered by the class
plus reasonable expenses.
‘‘(m) DISCLOSURE
OF SETTLEMENT
TERMS
TO
CLASS MEMBERS.—In an implied private action arising
under this title that is certified as a class action pursuant
to the Federal Rules of Civil Procedure, a proposed settle-
ment agreement that is published or otherwise dissemi-
nated to the class shall include the following statements,
which shall not be admissible for purposes of any Federal
or State judicial or administrative proceeding:
‘‘(1) STATEMENT OF POTENTIAL OUTCOME OF
CASE.—
‘‘(A) AGREEMENT ON AMOUNT OF DAM-
AGES AND LIKELIHOOD OF PREVAILING.—If the
settling parties agree on the amount of dam-
ages per share that would be recoverable if the
plaintiff prevailed on each claim alleged under
this title and the likelihood that the plaintiff
would prevail—
‘‘(i) 
a 
statement 
concerning 
the
amount of such potential damages; and
‘‘(ii) a statement concerning the prob-
ability that the plaintiff would prevail on
the claims alleged under this title and a
brief explanation of the reasons for that
conclusion.
‘‘(B) DISAGREEMENT
ON
AMOUNT
OF
DAMAGES OR LIKELIHOOD OF PREVAILING.—If
the parties do not agree on the amount of dam-
ages per share that would be recoverable if the
plaintiff prevailed on each claim alleged under
this title or on the likelihood that the plaintiff
would prevail on those claims, or both, a state-
ment from each settling party concerning the
issue or issues on which the parties disagree.
‘‘(C) INADMISSIBILITY FOR CERTAIN PUR-
POSES.—Statements made in accordance with
subparagraphs (A) and (B) shall not be admis-
sible for purposes of any Federal or State judi-
cial or administrative proceeding.
‘‘(2) STATEMENT
OF
ATTORNEYS’ FEES
OR
COSTS SOUGHT.—If any of the settling parties or
their counsel intend to apply to the court for an
award of attorneys’ fees or costs from any fund es-
tablished as part of the settlement, a statement indi-
cating which parties or counsel intend to make such
an application, the amount of fees and costs that
will be sought, and a brief explanation of the basis
for the application.
‘‘(3) IDENTIFICATION OF REPRESENTATIVES.—
The name, telephone number, and address of one or
more representatives of counsel for the plaintiff class
who will be reasonably available to answer questions
from class members concerning any matter con-
tained in any notice of settlement published or oth-
erwise disseminated to class members.
‘‘(4) OTHER INFORMATION.—Such other infor-
mation as may be required by the court, or by any
guardian ad litem or plaintiff steering committee ap-
pointed by the court pursuant to section 38.
‘‘(n) SPECIAL VERDICTS.—In an implied private ac-
tion arising under this title in which the plaintiff may re-
cover money damages only on proof that a defendant acted
with a particular state of mind, the court shall, when re-
quested by a defendant, submit to the jury a written inter-
rogatory on the issue of each such defendant’s state of
mind at the time the alleged violation occurred.’’.
SEC. 3. TIME LIMITATION ON PRIVATE RIGHTS OF ACTION.
The Securities Exchange Act of 1934 (15 U.S.C. 78a
et seq.) is amended by adding at the end the following
new section:
‘‘SEC. 36. LIMITATIONS PERIOD FOR IMPLIED PRIVATE
RIGHTS OF ACTION.
‘‘(a) IN GENERAL.—Except as otherwise provided in
this title, an implied private right of action arising under
this title shall be brought not later than the earlier of—
‘‘(1) 5 years after the date on which the alleged
violation occurred; or
‘‘(2) 2 years after the date on which the alleged
violation was discovered or should have been discov-
ered through the exercise of reasonable diligence.
‘‘(b) EFFECTIVE DATE.—The limitations period pro-
vided by this section shall apply to all proceedings pending
on or commenced after the date of enactment of this sec-
tion.’’.
SEC. 4. PLAINTIFF STEERING COMMITTEES.
The Securities Exchange Act of 1934 (15 U.S.C. 78a
et seq.) is amended by adding at the end the following
new section:
‘‘SEC. 37. GUARDIAN AD LITEM AND CLASS ACTION STEER-
ING COMMITTEES.
‘‘(a) GUARDIAN AD LITEM.—Except as provided in
subsection (b), not later than 10 days after certifying a
plaintiff class in an implied private action brought under
this title, the court shall appoint a guardian ad litem for
the plaintiff class from a list or lists provided by the par-
ties or their counsel. The guardian ad litem shall direct
counsel for the class and perform such other functions as
the court may specify. The court shall apportion the rea-
sonable fees and expenses of the guardian ad litem among
the parties. Court appointment of a guardian ad litem
shall not be subject to interlocutory review.
‘‘(b) CLASS ACTION STEERING COMMITTEE.—Sub-
section (a) shall not apply if, not later than 10 days after
certifying a plaintiff class, on its own motion or on motion
of a member of the class, the court appoints a committee
of class members to direct counsel for the class (hereafter
in this section referred to as the ‘plaintiff steering commit-
tee’) and to perform such other functions as the court may
specify. Court appointment of a plaintiff steering commit-
tee shall not be subject to interlocutory review.
‘‘(c) MEMBERSHIP OF PLAINTIFF STEERING COM-
MITTEE.—
‘‘(1) QUALIFICATIONS.—
‘‘(A) NUMBER.—A plaintiff steering com-
mittee shall consist of not less than 5 class
members, willing to serve, who the court be-
lieves will fairly represent the class.
‘‘(B) OWNERSHIP
INTERESTS.—Members
of the plaintiff steering committee shall have
cumulatively held during the class period not
less than—
‘‘(i) the lesser of 5 percent of the se-
curities which are the subject matter of the
litigation or securities which are the sub-
ject matter of the litigation with a market
value of $10,000,000; or
‘‘(ii) such smaller percentage or dollar
amount as the court finds appropriate
under the circumstances.
‘‘(2) NAMED PLAINTIFFS.—Class members who
are named plaintiffs in the litigation may serve on
the plaintiff steering committee, but shall not com-
prise a majority of the committee.
‘‘(3) NONCOMPENSATION OF MEMBERS.—Mem-
bers of the plaintiff steering committee shall serve
without compensation, except that any member may
apply to the court for reimbursement of reasonable
out-of-pocket expenses from any common fund es-
tablished for the class.
‘‘(4) MEETINGS.—The plaintiff steering com-
mittee shall conduct its business at one or more pre-
viously scheduled meetings of the committee at
which a majority of its members are present in per-
son or by electronic communication. The plaintiff
steering committee shall decide all matters within its
authority by a majority vote of all members, except
that the committee may determine that decisions
other than to accept or reject a settlement offer or
to employ or dismiss counsel for the class may be
delegated to one or more members of the committee,
or may be voted upon by committee members seria-
tim, without a meeting.
‘‘(5) RIGHT OF NONMEMBERS TO BE HEARD.—
A class member who is not a member of the plaintiff
steering committee may appear and be heard by the
court on any issue in the action, to the same extent
as any other party.
‘‘(d) FUNCTIONS
OF GUARDIAN AD LITEM
AND
PLAINTIFF STEERING COMMITTEE.—
‘‘(1) DIRECT COUNSEL.—The authority of the
guardian ad litem or the plaintiff steering committee
to direct counsel for the class shall include all pow-
ers normally permitted to an attorney’s client in liti-
gation, including the authority to retain or dismiss
counsel and to reject offers of settlement, and the
preliminary authority to accept an offer of settle-
ment, subject to the restrictions specified in para-
graph (2). Dismissal of counsel other than for cause
shall not limit the ability of counsel to enforce any
contractual fee agreement or to apply to the court
for a fee award from any common fund established
for the class.
‘‘(2) SETTLEMENT OFFERS.—If a guardian ad
litem or a plaintiff steering committee gives prelimi-
nary approval to an offer of settlement, the guardian
ad litem or the plaintiff steering committee may seek
approval of the offer by a majority of class members
if the committee determines that the benefit of seek-
ing such approval outweighs the cost of soliciting the
approval of class members.
‘‘(e) IMMUNITY FROM LIABILITY; REMOVAL.—Any
person serving as a guardian ad litem or as a member
of a plaintiff steering committee shall be immune from any
liability arising from such service. The court may remove
a guardian ad litem or a member of a plaintiff steering
committee for good cause shown.
‘‘(f) EFFECT ON OTHER LAW.—This section does not
affect any other provision of law concerning class actions
or the authority of the court to give final approval to any
offer of settlement.’’.
SEC. 5. REQUIREMENTS FOR SECURITIES FRAUD ACTIONS.
The Securities Exchange Act of 1934 (15 U.S.C. 78a
et seq.) is amended by adding at the end the following
new section:
‘‘SEC. 38. REQUIREMENTS FOR SECURITIES FRAUD AC-
TIONS.
‘‘(a) PLEADING WITH RESPECT TO SCIENTER.—
‘‘(1) IN GENERAL.—In an implied private ac-
tion arising under this title in which the plaintiff
may recover money damages from a defendant only
on proof that the defendant acted with some level of
intent, the plaintiff’s complaint shall allege specific
facts demonstrating the state of mind of each de-
fendant at the time the alleged violation occurred.
‘‘(2) MISLEADING
STATEMENTS
AND
OMIS-
SIONS.—In an implied action arising under this title
in which the plaintiff alleges that the defendant—
‘‘(A) made an untrue statement of a mate-
rial fact; or
‘‘(B) omitted to state a material fact nec-
essary in order to make the statements made,
in the light of the circumstances in which they
were made, not misleading;
the plaintiff shall specify each statement alleged to
have been misleading, the reason or reasons why the
statement is misleading, and, if an allegation regard-
ing the statement or omission is made on informa-
tion and belief, the plaintiff shall set forth all infor-
mation on which that belief is formed.
‘‘(3) MOTIONS TO DISMISS; DISCOVERY.—
‘‘(A) Upon motion by a defendant to dis-
miss for failure to allege the facts required by
paragraph (1) or (2), the court shall stay dis-
covery until such motion is decided. In ruling
upon any such motion, the court may take judi-
cial notice of all information publicly available
in the market affecting the total mix of infor-
mation known to investors concerning the issuer
or the issuer’s securities.
‘‘(B) If a complaint satisfies the require-
ments of paragraphs (1) and (2), the plaintiffs
shall be entitled to discovery limited to the facts
alleged concerning the misleading statement.
Upon completion of such discovery, that parties
may move for summary judgment.
‘‘(C) If a complaint fails to satisfy the re-
quirements of paragraph (1) or (2), the court
in its discretion may permit a single amended
complaint to be filed, subject to the right of any
defendant thereafter to move to dismiss such
amended complaint without leave to amend.
‘‘(b) PROOF OF SCIENTER.—
‘‘(1) IN GENERAL.—In an action to which sub-
section (a)(2) applies, a defendant may not be held
liable for money damages unless the plaintiff
proves—
‘‘(A) that the defendant directly or indi-
rectly made an untrue statement of a material
fact, or omitted to state a material fact nec-
essary in order to make the statements made,
in light of the circumstances in which they were
made, not misleading; and
‘‘(B) that the defendant—
‘‘(i) knew the statement was mislead-
ing at the time it was made, or inten-
tionally omitted to state a fact knowing
that such fact was necessary in order to
make the statements made, in light of the
circumstances in which they were made,
not misleading; or
‘‘(ii) in making such statement or
omitting such fact, acted recklessly.
‘‘(2) PROOF FOR INDIRECT STATEMENTS.—In
any such action, a defendant shall not be held to
have indirectly made a statement made by any per-
son that is not the issuer or an officer, director, or
employee of the issuer in a publicly disseminated
document, unless the plaintiff pleads and proves that
the facts or omissions alleged to have been mislead-
ing were attributed to such issuer, officer, director,
or employee.
‘‘(c) BURDEN OF PROOF OF CAUSATION.—In an im-
plied private action arising under this title based on a ma-
terial misstatement or omission concerning a security, and
in which the plaintiff claims to have bought or sold the
security based on a reasonable belief that the market value
of the security reflected all publicly available information,
the plaintiff shall have the burden of proving that the
misstatement or omission caused any loss incurred by the
plaintiff.
‘‘(d) DAMAGES.—In an implied private action arising
under this title based on a material misstatement or omis-
sion concerning a security, and in which the plaintiff
claims to have bought or sold the security based on a rea-
sonable belief that the market value of the security re-
flected all publicly available information, the plaintiff’s
damages shall not exceed the lesser of—
‘‘(1) the difference between the price paid by
the plaintiff for the security and the market value of
the security immediately after dissemination to the
market 
of 
information 
which 
corrects 
the
misstatement or omission; and
‘‘(2) the difference between the price paid by
the plaintiff for the security and the price at which
the plaintiff sold the security after dissemination of
information correcting the misstatement or omis-
sion.’’.
SEC. 6. PROPORTIONATE LIABILITY AND JOINT AND SEV-
ERAL LIABILITY.
(a) SECURITIES ACT AMENDMENT.—The Securities
and Exchange Act of 1934 (15 U.S.C. 78a et seq.) is
amended by adding at the end the following new section:
‘‘SEC. 40. PROPORTIONATE LIABILITY AND JOINT AND SEV-
ERAL LIABILITY IN IMPLIED ACTIONS.
‘‘(a) APPLICABILITY.—This section shall apply only
to the allocation of damages among persons who are, or
who may become, liable for damages in an implied private
action arising under this title. Nothing in this section shall
affect the standards for liability associated with an implied
private action arising under this title.
‘‘(b) APPLICATION OF JOINT AND SEVERAL LIABIL-
ITY.—
‘‘(1) IN GENERAL.—A person against whom a
judgment is entered in an implied private action
arising under this title shall be liable jointly and sev-
erally for any recoverable damages on such judg-
ment if the person is found to have—
‘‘(A) been a primary wrongdoer;
‘‘(B) committed knowing securities fraud;
or
‘‘(C) controlled any primary wrongdoer or
person who committed knowing securities fraud.
‘‘(2) PRIMARY WRONGDOER.—As used in this
subsection—
‘‘(A) 
the 
term 
‘primary 
wrongdoer’
means—
‘‘(i) any—
‘‘(I) issuer, registrant, purchaser,
seller, or underwriter of securities;
‘‘(II) marketmaker or specialist
in securities; or
‘‘(III) clearing agency, securities
information processor, or government
securities dealer;
if such person breached a direct statutory
or regulatory obligation or if such person
otherwise had a principal role in the con-
duct that is the basis for the implied right
of action; or
‘‘(ii) any person who intentionally ren-
dered substantial assistance to the fraudu-
lent conduct of any person described in
clause (i), with actual knowledge of such
person’s fraudulent conduct or fraudulent
purpose, and with knowledge that such
conduct was wrongful; and
‘‘(B) a defendant engages in ‘knowing se-
curities fraud’ if such defendant—
‘‘(i) makes a material representation
with actual knowledge that the representa-
tion is false, or omits to make a statement
with actual knowledge that, as a result of
the omission, one of the defendant’s mate-
rial representations is false and knows that
other persons are likely to rely on that
misrepresentation or omission, except that
reckless conduct by the defendant shall not
be construed to constitute ‘knowing securi-
ties fraud’; or
‘‘(ii) intentionally rendered substantial
assistance to the fraudulent conduct of any
person described in clause (i), with actual
knowledge of such person’s fraudulent con-
duct or fraudulent purpose, and with
knowledge that such conduct was wrongful.
‘‘(c) DETERMINATION OF RESPONSIBILITY.—In an
implied private action in which more than 1 person con-
tributed to a violation of this title, the court shall instruct
the jury to answer special interrogatories, or if there is
no jury, shall make findings, concerning the degree of re-
sponsibility of each person alleged to have caused or con-
tributed to the violation of this title, including persons who
have entered into settlements with the plaintiff. The inter-
rogatories or findings shall specify the amount of damages
the plaintiff is entitled to recover and the degree of respon-
sibility, measured as a percentage of the total fault of all
persons involved in the violation, of each person found to
have caused or contributed to the damages incurred by
the plaintiff or plaintiffs. In determining the degree of re-
sponsibility, the trier of fact shall consider—
‘‘(1) the nature of the conduct of each person;
and
‘‘(2) the nature and extent of the causal rela-
tionship between that conduct and the damage
claimed by the plaintiff.
‘‘(d) APPLICATION OF PROPORTIONATE LIABILITY.—
Except as provided in subsection (b), the amount of liabil-
ity of a person who is, or may through right of contribu-
tion become, liable for damages based on an implied pri-
vate action arising under this title shall be determined as
follows:
‘‘(1) DEGREE OF RESPONSIBILITY.—Except as
provided in paragraph (2), each liable party shall