Chris Dodd: “At a hearing on S. 1260 last October, the Securities and Exchange Commission (SEC) voiced concern over some recent…”

“At a hearing on S. 1260 last October, the Securities and Exchange Commission (SEC) voiced concern over some recent federal district court decisions on the state of mind--or scienter--requirement for pleading fraud that was adopted in the Private Securities Litigation Reform Act of 1995 ('95 Reform Act or PSLRA). According to the SEC, some federal district courts have concluded that the 1995 Reform Act adopted a pleading standard that was more rigorous than the second circuit's, which, at the time of enactment of the PSLRA, had the toughest pleading standards in the nation. Some of these courts have also suggested that the '95 Reform Act changed not only the pleading standard but also the standard for proving the scienter requirement. At the time we enacted the PSLRA, every federal court of appeals in the nation--ten in number--concluded that the scienter requirement could be met by proof of recklessness.”