Steve W. Berman is managing partner of Hagens Berman. He co-founded the firm in 1993.
Securities litigation has increased dramatically in complexity in recent years. Institutional investors have been forced to adapt to changes on three fronts.
First, the proliferation of new financial instruments and exotic investments has confused even the savviest, forward thinking fiduciaries. We saw many of these instruments fail in the 2008 financial crisis, but that has not stopped Wall Street from crafting increasingly complex packages based on a variety of exotic, and often risky, investments.
At the same time, the law itself has undergone changes in recent years, first with the passage of Sarbanes-Oxley in the aftermath of the scandals at Enron and WorldCom, and most recently with the passage of the Dodd-Frank Financial Reform Bill in the wake of the financial crisis. Many well qualified attorneys have been left in the dust, unable to compete with those who have adapted to the latest changes to the securities laws. It goes without saying that institutional investors, most of whom do not have a legal background, are left scratching their heads trying to determine whether they might have a valid legal claim.
These legal changes have coincided with a third problem; the transformational power of technology. As manic as the pace was on Wall Street twenty years ago, information now travels even faster. When it comes to news about poor financial results, what author Douglas Adams said is instructive: “Nothing travels faster than the speed of light, with the possible exception of bad news, which obeys its own special laws.”
Instant communication has also opened up opportunities on foreign exchanges that were previously much less accessible. Those new opportunities carry risks as U.S. laws will not necessarily protect investors who purchase securities on foreign exchanges.
At Hagens Berman we have adapted to these changes in order to better serve our clients. We have hired experts to help us understand even the most exotic and complex investments packaged on Wall Street. For instance, we negotiated a $200 million settlement with Charles Schwab for investors in its Yield Plus funds, which we alleged had been packaged with risky mortgage-backed debt.
At the same time we have made a concerted effort to hire attorneys who have a financial background. Several of our securities attorneys are also CPAs or have experience in accounting or auditing. To keep pace with publicly traded companies that seem to find new loopholes and tricks to cook their books every day, we’ve hired forensic accountants, experts at uncovering the truth.
We’ve also embraced changes in the law. For instance, when Dodd-Frank instituted a new SEC whistleblower program, we expanded our existing whistleblower practice to include the new program.
Lastly, we’ve recognized the importance of technology by remaining flexible in the face of trends that seem to change daily. We’ve made sure our attorneys stay up to date on the latest developments when it comes to not only how securities are traded, but where they are traded and what investors purchasing on foreign exchanges can do to protect themselves.
I have no doubt that securities litigation will continue to increase in complexity, and I believe that we are positioned to continue to adapt to the changes and provide excellent representation for our clients.