Using State Inspection Statutes for Discovery in Federal Securities Fraud Actions

40 Pages Posted: 23 Dec 2010

See all articles by Randall S. Thomas

Randall S. Thomas

Vanderbilt University - Law School; European Corporate Governance Institute (ECGI)

Kenneth J. Martin

New Mexico State University - Department of Finance & Business Law

Date Written: February 1, 1997

Abstract

We propose that plaintiffs in securities fraud actions should use state inspections statutes to obtain discovery about potential securities fraud cases. First, we argue that the Private Securities Law Reform Act has substantially increased shareholders' difficulty in uncovering securities fraud. Next, we show that shareholders have an alternative method of investigating fraud: state inspections statutes. We then analyze cases filed under the Delaware inspection statute to examine the costs to plaintiffs of pursuing claims under this statute. We find that the statutory inspection process is a largely successful, although expensive and time-consuming, process. Nevertheless, potential plaintiffs could realize substantial benefits from utilizing inspection statutes in this manner, particularly if Delaware streamlined its inspection process to make it faster and less costly for shareholders seeking information.

Keywords: State, Inspection, Delaware, Statutes, Fraud, Securities

Suggested Citation

Thomas, Randall S. and Martin, Kenneth J., Using State Inspection Statutes for Discovery in Federal Securities Fraud Actions (February 1, 1997). Boston University Law Review, Vol. 77, No. 1, p. 70, 1997, Vanderbilt Public Law Research Paper, Available at SSRN: https://ssrn.com/abstract=1729836

Randall S. Thomas (Contact Author)

Vanderbilt University - Law School ( email )

131 21st Avenue South
Nashville, TN 37203-1181
United States

European Corporate Governance Institute (ECGI)

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

Kenneth J. Martin

New Mexico State University - Department of Finance & Business Law ( email )

College of Business Administration & Economics
Las Cruces, NM 88003
United States
505-646-3201 (Phone)
505-646-2820 (Fax)

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