Max Cleland: “in the wake of final passage of S. 1260, the Securities Litigation Uniform Standards Act, I wish to emphasize my…”

“in the wake of final passage of S. 1260, the Securities Litigation Uniform Standards Act, I wish to emphasize my interest in the retention and reinforcement of the recklessness standard of liability and the Second Circuit Court of Appeals pleading standard in federal securities fraud cases. Securities law experts, including officials of the Securities and Exchange Commission, have recognized that the continued vitality of the federal securities laws and the health of the financial markets depend on the reaffirmation of this standard. It is essential that we be clear that reckless wrongdoing satisfies the scienter standard under the federal securities laws. The current standard that provides liability for reckless behavior should be explicitly reaffirmed; any suggestion that a victimized investor must establish actual knowledge by a defendant is not only legally incorrect but would undermine the integrity of our financial markets. The SEC has repeatedly stated in legal filings and Congressional testimony that the recklessness standard is critical to investor protection. Every federal appellate court that has considered this issue has held that recklessness suffices. The text of the 1995 Private Securities Litigation Reform Act did not change the scienter standard; Members of Congress understood that raising the standard would have not only a chilling effect on private actions by defrauded individuals, but on regulatory actions by the SEC.”