‘‘(3) APPLICATION FOR FEES.—A party seeking
an award of fees and other expenses shall, within 30
days of a final, nonappealable judgment in the ac-
tion, submit to the court an application for fees and
other expenses that verifies that the party is entitled
to such an award under paragraph (1) and the
amount sought, including an itemized statement
from any attorney or expert witness representing or
appearing on behalf of the party stating the actual
time expended and the rate at which fees and other
expenses are computed.
‘‘(4) ALLOCATION AND SIZE OF AWARD.—The
court, in its discretion, may—
‘‘(A) determine whether the amount to be
awarded pursuant to this section shall be
awarded against the losing party, its attorney,
or both; and
‘‘(B) reduce the amount to be awarded
pursuant to this section, or deny an award, to
the extent that the prevailing party during the
course of the proceedings engaged in conduct
that unduly and unreasonably protracted the
final resolution of the action.
‘‘(5) AWARDS IN DISCOVERY PROCEEDINGS.—
In adjudicating any motion for an order compelling
discovery or any motion for a protective order made
in any private action arising under this title, the
court shall award the prevailing party reasonable
fees and other expenses incurred by the party in
bringing or defending against the motion, including
reasonable attorneys’ fees, unless the court finds
that special circumstances make an award unjust.
‘‘(6) RULE
OF
CONSTRUCTION.—Nothing in
this subsection shall be construed to limit or impair
the discretion of the court to award costs pursuant
to other provisions of law.
‘‘(7) PROTECTION
AGAINST
ABUSE
OF
PROC-
ESS.—In any action to which this subsection applies,
a court shall not permit a plaintiff to withdraw from
or voluntarily dismiss such action if the court deter-
mines that such withdrawal or dismissal is taken for
purposes of evasion of the requirements of this sub-
section.
‘‘(8) DEFINITIONS.—For purposes of this sub-
section—
‘‘(A) The term ‘fees and other expenses’
includes the reasonable expenses of expert wit-
nesses, the reasonable cost of any study, analy-
sis, report, test, or project which is found by
the court to be necessary for the preparation of
the party’s case, and reasonable attorneys’ fees
and expenses. The amount of fees awarded
under this section shall be based upon prevail-
ing market rates for the kind and quality of
services furnished.
‘‘(B) The term ‘substantially justified’
shall have the same meaning as in section
2412(d)(1) of title 28, United States Code.
‘‘(d) PREVENTION OF ABUSIVE CONFLICTS OF IN-
TEREST.—In any private action under this title pursuant
to a complaint seeking damages on behalf of a class, if
the class 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, on motion
by any party, make a determination of whether such inter-
est constitutes a conflict of interest sufficient to disqualify
the attorney from representing the class.
‘‘(e) DISCLOSURE OF SETTLEMENT TERMS TO CLASS
MEMBERS.—In any private action under this title that is
certified as a class action pursuant to the Federal Rules
of Civil Procedure, any settlement agreement that is pub-
lished or otherwise disseminated to the class shall include
the following statements:
‘‘(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 likeli-
hood that the plaintiff would prevail on the
claims alleged under this title and a brief
explanation of the reasons for that conclu-
sion.
‘‘(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) concerning the
amount of damages and the likelihood of pre-
vailing shall not be admissible for purposes of
any Federal or State judicial action or adminis-
trative 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 (including the amount of such fees
and costs determined on a per-share basis, together
with the amount of the settlement proposed to be
distributed to the parties to suit, determined on a
per-share basis), and a brief explanation of the basis
for the application. Such information shall be clearly
summarized on the cover page of any notice to a
party of any settlement agreement.
‘‘(3) 
IDENTIFICATION
OF
LAWYERS’ 
REP-
RESENTATIVES.—The name and address of one or
more representatives of counsel for the class who
will be reasonably available to answer written ques-
tions from class members concerning any matter
contained in any notice of settlement published or
otherwise disseminated to the class.
‘‘(4) OTHER INFORMATION.—Such other infor-
mation as may be required by the court, or by any
plaintiff steering committee appointed by the court
pursuant to section 36.
‘‘(f) ENCOURAGEMENT
OF FINALITY
IN SETTLE-
MENT DISCHARGES.—
‘‘(1) DISCHARGE.—A defendant who settles any
private action arising under this title at any time be-
fore verdict or judgment shall be discharged from all
claims for contribution brought by other persons
with respect to the matters that are the subject of
such action. Upon entry of the settlement by the
court, the court shall enter a bar order constituting
the final discharge of all obligations to the plaintiff
of the settling defendant arising out of the action.
The order shall bar all future claims for contribution
or indemnity arising out of the action—
‘‘(A) by nonsettling persons against the
settling defendant; and
‘‘(B) by the settling defendant against any
nonsettling defendants.
‘‘(2) REDUCTION.—If a person enters into a
settlement with the plaintiff prior to verdict or judg-
ment, the verdict or judgment shall be reduced by
the greater of—
‘‘(A) an amount that corresponds to the
percentage of responsibility of that person; or
‘‘(B) the amount paid to the plaintiff by
that person.
‘‘(g) CONTRIBUTION FROM NON-PARTIES IN INTER-
ESTS OF FAIRNESS.—
‘‘(1) RIGHT OF CONTRIBUTION.—A person who
becomes liable for damages in any private action
under this title (other than an action under section
9(e) or 18(a)) may recover contribution from any
other person who, if joined in the original suit,
would have been liable for the same damages.
‘‘(2) STATUTE OF LIMITATIONS FOR CONTRIBU-
TION.—Once judgment has been entered in any such
private action determining liability, an action for
contribution must be brought not later than 6
months after the entry of a final, nonappealable
judgment in the action.
‘‘(h) DEFENDANT’S RIGHT TO WRITTEN INTERROG-
ATORIES ESTABLISHING SCIENTER.—In any private ac-
tion under this title in which the plaintiff may recover
money damages, the court shall, when requested by a de-
fendant, submit to the jury a written interrogatory on the
issue of each such defendant’s state of mind at the time
the alleged violation occurred.’’.
(b) PROHIBITION OF REFERRAL FEES THAT FO-
MENT LITIGATION.—Section 15(c) of the Securities Ex-
change Act of 1934 (15 U.S.C. 78o(c)) is amended by add-
ing at the end the following new paragraph:
‘‘(8) RECEIPT OF REFERRAL FEES.—No broker or
dealer, or person associated with a broker or dealer, may
solicit or accept remuneration for assisting an attorney in
obtaining the representation of any customer in any pri-
vate action under this title.’’.
SEC. 4. PREVENTION OF ‘‘FISHING EXPEDITION’’ LAWSUITS.
The Securities Exchange Act of 1934 (15 U.S.C. 78a
et seq.) is amended by inserting after section 10 the fol-
lowing new section:
‘‘SEC. 10A. REQUIREMENTS FOR SECURITIES FRAUD AC-
TIONS.
‘‘(a) SCIENTER.—
‘‘(1) IN GENERAL.—In any private action aris-
ing under this title based on a fraudulent statement,
liability may be established only on proof that—
‘‘(A) the defendant directly or indirectly
made a fraudulent statement;
‘‘(B) the defendant possessed the intention
to deceive, manipulate, or defraud; and
‘‘(C) the defendant made such fraudulent
statement knowingly or recklessly.
‘‘(2) FRAUDULENT STATEMENT.—For purposes
of this section, a fraudulent statement is a state-
ment that contains an untrue statement of a mate-
rial fact, or omits a material fact necessary in order
to make the statements made, in the light of the cir-
cumstances in which they were made, not mislead-
ing.
‘‘(3) KNOWINGLY.—For purposes of paragraph
(1), a defendant makes a fraudulent statement
knowingly if the defendant knew that the statement
of a material fact was untrue at the time it was
made, or knew that an omitted fact was necessary
in order to make the statements made, in the light
of the circumstances in which they were made, not
misleading.
‘‘(4) RECKLESSNESS.—For purposes of para-
graph (1), a defendant makes a fraudulent state-
ment recklessly if the defendant, in making such
statement, is guilty of highly unreasonable conduct
that (A) involves not merely simple or even gross
negligence, but an extreme departure from standards
of ordinary care, and (B) presents a danger of mis-
leading buyers or sellers that was either known to
the defendant or so obvious that the defendant must
have been consciously aware of it. For example, a
defendant who genuinely forgot to disclose, or to
whom disclosure did not come to mind, is not reck-
less.
‘‘(b) REQUIREMENT
FOR EXPLICIT PLEADING
OF
SCIENTER.—In any private action to which subsection (a)
applies, the complaint shall specify each statement or
omission alleged to have been misleading, and the reasons
the statement or omission was misleading. The complaint
shall also make specific allegations which, if true, would
be sufficient to establish scienter as to each defendant at
the time the alleged violation occurred. It shall not be suf-
ficient for this purpose to plead the mere presence of facts
inconsistent with a statement or omission alleged to have
been misleading. If an allegation is made on information
and belief, the complaint shall set forth with specificity
all information on which that belief is formed.
‘‘(c) DISMISSAL FOR FAILURE TO MEET PLEADING
REQUIREMENTS; STAY OF DISCOVERY; SUMMARY JUDG-
MENT.—In any private action to which subsection (a) ap-
plies, the court shall, on the motion of any defendant, dis-
miss the complaint if the requirements of subsection (b)
are not met, except that the court may, in its discretion,
permit a single amended complaint to be filed. During the
pendency of any such motion to dismiss, all discovery and
other proceedings shall be stayed unless the court finds
upon the motion of any party that particularized discovery
is necessary to preserve evidence or to prevent undue prej-
udice to that party. If a complaint satisfies the require-
ments of subsection (b), the plaintiff shall be entitled to
conduct discovery limited to the facts concerning the alleg-
edly misleading statement or omission. Upon completion
of such discovery, the parties may move for summary
judgment.
‘‘(d) RELIANCE AND CAUSATION.—
‘‘(1) IN GENERAL.—In any private action to
which subsection (a) applies, the plaintiff shall prove
that—
‘‘(A) he or she had knowledge of, and re-
lied (in connection with the purchase or sale of
a security) on, the statement that contained the
misstatement or omission described in sub-
section (a)(1); and
‘‘(B) that the statement containing such
misstatement or omission proximately caused
(through both transaction causation and loss
causation) any loss incurred by the plaintiff.
‘‘(2) FRAUD ON THE MARKET.—For purposes
of paragraph (1), reliance may be proven by estab-
lishing that the market as a whole considered the
fraudulent statement, that the price at which the se-
curity was purchased or sold reflected the market’s
estimation of the fraudulent statement, and that the
plaintiff relied on that market price. Proof that the
market as a whole considered the fraudulent state-
ment may consist of evidence that the statement—
‘‘(A) was published in publicly available re-
search reports by analysts of such security;
‘‘(B) was the subject of news articles;
‘‘(C) was delivered orally at public meet-
ings by officers of the issuer, or its agents;
‘‘(D) was specifically considered by rating
agencies in their published reports; or
‘‘(E) was otherwise made publicly available
to the market in a manner that was likely to
bring it to the attention of, and to be consid-
ered as credible by, other active participants in
the market for such security.
Nonpublic information may not be used as proof
that the market as a whole considered the fraudu-
lent statement.
‘‘(3) PRESUMPTION OF RELIANCE.—Upon proof
that the market as a whole considered the fraudu-
lent statement pursuant to paragraph (2), the plain-
tiff is entitled to a rebuttable presumption that the
price at which the security was purchased or sold re-
flected the market’s estimation of the fraudulent
statement and that the plaintiff relied on such mar-
ket price. This presumption may be rebutted by evi-
dence that—
‘‘(A) the market as a whole considered
other information that corrected the allegedly
fraudulent statement; or
‘‘(B) the plaintiff possessed such corrective
information prior to the purchase or sale of the
security.
‘‘(4) REASONABLE EXPECTATION OF INTEGRITY
OF MARKET PRICE.—A plaintiff who buys or sells a
security for which it is unreasonable to rely on mar-
ket price to reflect all current information may not
establish reliance pursuant to paragraph (2). For
purposes of paragraph (2), the following factors
shall be considered in determining whether it was
reasonable for a party to expect the market price of
the security to reflect substantially all publicly avail-
able information regarding the issuer of the security:
‘‘(A) The weekly trading volume of any
class of securities of the issuer of the security.
‘‘(1) JOINT
AND
SEVERAL
LIABILITY
FOR
KNOWING FRAUD.—A defendant who is found liable
for damages in a private action to which subsection
(a) applies may be liable jointly and severally only
if the trier of fact specifically determines that the
defendant acted knowingly (as defined in subsection
(a)(3)).
‘‘(2) PROPORTIONATE
LIABILITY
FOR
RECK-
LESSNESS.—If the trier of fact does not make the
findings required by paragraph (1) for joint and sev-
eral liability, a defendant’s liability in a private ac-
tion to which subsection (a) applies shall be deter-
mined under paragraph (3) of this subsection only
if the trier of fact specifically determines that the
defendant acted recklessly (as defined in subsection
(a)(4)).
‘‘(3) DETERMINATION OF PROPORTIONATE LI-
ABILITY.—If the trier of fact makes the findings re-
quired by paragraph (2), the defendant’s liability
shall be determined as follows:
‘‘(A) The trier of fact shall determine the
percentage of responsibility of the plaintiff, of
each of the defendants, and of each of the other
persons or entities alleged by the parties to
have caused or contributed to the harm alleged
by the plaintiff. In determining the percentages
of responsibility, the trier of fact shall consider
both the nature of the conduct of each person
and the nature and extent of the causal rela-
tionship between that conduct and the damage
claimed by the plaintiff.
‘‘(B) For each defendant, the trier of fact
shall then multiply the defendant’s percentage
of responsibility by the total amount of damage
suffered by the plaintiff that was caused in
whole or in part by that defendant and the
court shall enter a verdict or judgment against
the defendant in that amount. No defendant
whose liability is determined under this sub-
section shall be jointly liable on any judgment
entered against any other party to the action.
‘‘(C) Except where contractual relationship
permits, no defendant whose liability is deter-
mined under this paragraph shall have a right
to recover any portion of the judgment entered
against such defendant from another defendant.
‘‘(4) EFFECT OF PROVISION.—This subsection
relates only to the allocation of damages among de-
fendants. Nothing in this subsection shall affect the
standards for liability under any private action aris-
ing under this title.
‘‘(f) DAMAGES.—In any private action to which sub-
section (a) applies, 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’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 fraudulent
statement; 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 fraudulent statement.’’.
SEC. 5. ESTABLISHMENT OF ‘‘SAFE HARBOR’’ FOR PRE-
DICTIVE STATEMENTS.
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. APPLICATION OF SAFE HARBOR FOR FORWARD-
LOOKING STATEMENTS.
‘‘(a) SAFE HARBOR DEFINED.—In any action arising
under this title based on a fraudulent statement (within
the meaning of section 10A), a person shall not be liable
for the publication of any projection if—
‘‘(1) the basis for such projection is briefly de-
scribed therein, with citations (which may be gen-
eral) to representative sources or authority, and a
disclaimer is made to alert persons for whom such
information is intended that the projections should
not be given any more weight than the described
basis therefor would reasonably justify; and
‘‘(2) the basis for such projection is not inac-
curate as of the date of publication, determined
without benefit of subsequently available information
or information not known to such person at such
date.
‘‘(b) AUTOMATIC PROTECTIVE ORDER STAYING DIS-
COVERY; EXPEDITED PROCEDURE.—In any action arising
under this title based on a fraudulent statement (within
the meaning of section 10A) by any person, such person
may, at any time beginning after the filing of the com-
plaint and ending 10 days after the filing of such person’s
answer to the complaint, move to obtain an automatic pro-
tective order under the safe harbor procedures of this sec-
tion. Upon such motion, the protective order shall issue
forthwith to stay all discovery as to the moving party, ex-
cept that which is directed to the specific issue of the ap-
plicability of the safe harbor. A hearing on the applicabil-
ity of the safe harbor shall be conducted within 45 days
of the issuance of such protective order. At the conclusion
of the hearing, the court shall either (1) dismiss the por-
tion of the action based upon the use of a projection to
which the safe harbor applies, or (2) determine that the
safe harbor is unavailable in the circumstances.
‘‘(c) REGULATORY
AUTHORITY.—In consultation
with investors and issuers of securities, the Commission
shall adopt rules and regulations to facilitate the safe har-
bor provisions of this section. Such rules and regulations
shall—
‘‘(1) include clear and objective guidance that
the Commission finds sufficient for the protection of
investors,
‘‘(2) prescribe such guidance with sufficient
particularity that compliance shall be readily ascer-
tainable by issuers prior to issuance of securities,
and
‘‘(3) provide that projections that are in compli-
ance with such guidance and that concern the future
economic performance of an issuer of securities reg-