Funder, Short-Seller Use Undermines Securities Class Actions

Law360 (August 24, 2020, 3:00 PM EDT) -- Two factors in the securities class action arena are exacerbating the potential for conflicts of interest: the use of and reliance on activist short-seller reports as a basis to initiate securities class action claims, and privileged third-party litigation funding agreements.

These two seemingly distinct factors are related due to their potential to breed systemic conflicts of interest that inhibit the effective private enforcement of our federal securities laws if they are left to proliferate without warranted judicial scrutiny.

First, securities class action plaintiffs attorneys have been hooked by activist short-sellers, whose singular objective is to earn above-market returns through the dissemination...

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