DISIMPLYING PRIVATE RIGHTS OF ACTION UNDER THE FEDERAL SECURITIES-LAWS - THE COMMISSIONS AUTHORITY

Billions of dollars have changed hands in private class action lawsuits alleging securities fraud. Defendants in these actions complain of a wave of litigation that unfairly targets ''deep pockets,'' confuses legitimate market volatility with fraud, and acts as a tax on capital formation. Plaintiffs counter that the volume of litigation has decreased relative to the size of America's capital markets, and that defendants have only themselves to blame for overly-optimistic statements or faulty audits. Meanwhile, the Securities and Exchange Commission (''Commission'') remains a bystander to the debate as a gridlocked Congress wrestles with competing proposals to reform the laws governing securities fraud litigation. The Commission does not, however, have to remain on the sidelines. Most private securities fraud litigation arises pursuant to statutory provisions under which the Commission has substantial rulemaking authority. Moreover, most of this litigation arises pursuant to provisions for which the courts have implied private damage remedies that are not express in the statute. This Article demonstrates that Congress has already delegated to the Commission all the authority the Commission needs to ''disimply'' - to redefine through the rulemaking process - the most significant of these implied private remedies, the Rule Iob-5 cause of action. In addition, the Commission can disimply these remedies in a manner that fully preserves the Commission's own enforcement authority. Substantial securities litigation reform can therefore occur through the administrative process and does not require legislative intervention. This Article further argues that the Commission should, as the expert agency that Congress specifically created to deal with complex matters relating to the definition and prosecution of securities fraud, institute a rulemaking proceeding to explore if, when, and how private rights should be administratively disimplied, thereby shifting the focus of the securities litigation debate from Capitol Hill to the Commission.