Public and Private Enforcement of the Securities Laws: Have Things Changed Since Enron?

15 Pages Posted: 27 Jan 2005 Last revised: 26 Aug 2017

See all articles by James D. Cox

James D. Cox

Duke University School of Law

Randall S. Thomas

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

Date Written: 2005


In this paper, we examine how those corporations that have been the targets of SEC enforcement efforts compare in terms of their size and financial health vis-a-vis firms that are targeted only by the private securities class action. We also ask whether the SEC or the private bar systematically proceeds against violators that cause the greatest loss to investors. In this regard, we are intrigued by the most basic question posed by private suits, whether settlements bear any relationship to the losses suffered by the class and whether those losses bear any relationship to the size of either the firm itself or the duration of the class action. Our data set consists of 389 securities class action settlements that occurred between 1990 and 2003.

Using multivariate regression analysis to examine the determinants of government litigation, we find a sharp change in the pattern of SEC enforcement actions after the end of 2001. We find that the SEC seems to have shifted its enforcement focus away from targeting frauds at firms in financial distress to seeking out frauds at companies where investors may have suffered larger losses, especially if they are smaller firms.

Again applying multivariate regression analysis, we look at settlement sizes in private class actions. We find that provable losses, total assets, class period and the presence of an SEC enforcement action, are all positively and significantly related to the dollar amount of the settlement obtained in a private action. These effects do not change over the time period of our sample. The fact that provable losses are such an important determinant of the size of actual recoveries supports the view that the "merits do matter."

Keywords: SEC, Securities Laws, Enron6

Suggested Citation

Cox, James D. and Thomas, Randall S., Public and Private Enforcement of the Securities Laws: Have Things Changed Since Enron? (2005). 80 Notre Dame Law Review 893 (2005); Vanderbilt Law and Economics Research Paper No. 05-02. Available at SSRN:

James D. Cox

Duke University School of Law ( email )

210 Science Drive
Box 90362
Durham, NC 27708
United States
919-613-7056 (Phone)
919-613-7231 (Fax)

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)

B-1050 Brussels

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