Markets as Monitors: A Proposal to Replace Class Actions with Exchanges as Securities Fraud Enforcers

Posted: 31 Aug 2000

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Abstract

This Article proposes the replacement of securities fraud class actions for "fraud on the market" with an enforcement regime administered by the securities exchanges. It discusses the social costs of fraud in secondary trading markets and the respective roles of compensation and deterrence in controlling those costs. The expense and ineffectiveness of securities class actions in achieving deterrence are explained. An alternative regime enforced by the exchanges is outlined, and the incentives of exchanges to enforce anti-fraud prohibitions are analyzed.

JEL Classification: K22, K42

Suggested Citation

Pritchard, Adam C., Markets as Monitors: A Proposal to Replace Class Actions with Exchanges as Securities Fraud Enforcers. Available at SSRN: https://ssrn.com/abstract=197788

Adam C. Pritchard (Contact Author)

University of Michigan Law School ( email )

625 South State Street
Ann Arbor, MI 48109-1215
United States
734-647-4048 (Phone)
734-647-7349 (Fax)

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