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What Should A Lead Plaintiff Do?

Introduced by the Private Securities Litigation Reform Act of 1995 (PSLRA), the lead plaintiff is one of the newest and most logical approaches to the age-old problem of aligning the interests of the plaintiff’s attorney with those of the class that the attorney represents in class litigation. But the PSLRA is incomplete because it never tells us what the lead plaintiff is expected to do. Under the PSLRA, the “most adequate plaintiff” in any securities class action is presumptively the plaintiff who “has the largest financial interest in the relief sought by the class.”[1] The premise here is that the class member with the largest stake in the action will do the best job of monitoring the plaintiff’s attorney and ensuring that the attorney pursues the class’s interests and not simply the attorney’s own private interests. From an agency cost perspective, this makes obvious sense: assign the task of monitoring the agent to the party with the best incentive to perform this task.

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