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

Billions of dollars have changed hands in private class action lawsuit s alleging securities fraud. Defendants in these actions complain of a wave of litigation that unfairly targets ''deep pockets,'' confuses l egitimate market volatility with fraud, and acts as a tax on capital f ormation. Plaintiffs counter that the volume of litigation has decreas ed relative to the size of America's capital markets, and that defenda nts have only themselves to blame for overly-optimistic statements or faulty audits. Meanwhile, the Securities and Exchange Commission (''Co mmission'') remains a bystander to the debate as a gridlocked Congress wrestles with competing proposals to reform the laws governing securi ties fraud litigation. The Commission does not, however, have to remai n on the sidelines. Most private securities fraud litigation arises pu rsuant to statutory provisions under which the Commission has substant ial rulemaking authority. Moreover, most of this litigation arises pur suant to provisions for which the courts have implied private damage r emedies that are not express in the statute. This Article demonstrates that Congress has already delegated to the Commission all the authori ty the Commission needs to ''disimply'' - to redefine through the rule making process - the most significant of these implied private remedie s, the Rule Iob-5 cause of action. In addition, the Commission can dis imply these remedies in a manner that fully preserves the Commission's own enforcement authority. Substantial securities litigation reform c an therefore occur through the administrative process and does not req uire legislative intervention. This Article further argues that the Co mmission should, as the expert agency that Congress specifically creat ed to deal with complex matters relating to the definition and prosecu tion of securities fraud, institute a rulemaking proceeding to explore if, when, and how private rights should be administratively disimplie d, thereby shifting the focus of the securities litigation debate from Capitol Hill to the Commission.