This fall, the U.S. Supreme Court will hear arguments in three consolidated cases arising from the Allen Stanford Ponzi scheme. The petitioners in Chadbourne & Park LLP v. Troice, Willis of Colorado Inc. v. Troice and Proskauer Rose LLP v. Troice are challenging the restrictive application of the Securities Litigation Uniform Standards Act, announced by the Fifth Circuit in Roland v. Green, 675 F.3d 503 (5th Cir. 2012). If the Fifth Circuit’s decision is affirmed, non-issuer participants in securities transactions, including lawyers, auditors and investment managers, can expect to be named more frequently in cases under state law.

The History of SLUSA

The Securities Litigation Uniform Standards Act (SLUSA), 15 USC § 78bb, was enacted in 1998 to solve problems inadvertently created by the Private Securities Litigation Reform Act of 1995 (PSLRA), Pub. L. 104-67. Congress passed the PSLRA to deter frivolous class actions alleging securities fraud. To that end, the PSLRA requires more particularity in pleadings, imposes a stay on discovery while a court considers motions to dismiss, and ensures that an appropriate plaintiff, rather than a lawyer’s hand-picked “client,” represents the class in any case that moves forward.