Chapter 1: The development of securities litigation as a lawmaking partnership
Full access

This chapter discusses the unusual pedigree of federal securities fraud litigation. The securities fraud cause of action was created by the federal courts. Although Congress has, in turn, responded, its interventions have been limited in scope and largely deferential to the resulting body of judgemade law. As discussed in this chapter, the collaborative process by which Congress, the courts, and the SEC have developed private securities fraud litigation reflects a lawmaking partnership. The chapter defends this partnership as a normatively desirable approach and identifies distinctive advantages over alternatives such as a more detailed statute or a broad delegation by Congress to the courts or an administrative agency. The chapter concludes that, as a result, the Court should use the existence of a lawmaking partnership as a canon of construction in construing the scope of its own lawmaking authority. Where the Court finds evidence of this type of collaborative process, it should seek to further Congress’s lawmaking objectives rather than limiting its inquiry to the contours of the statutory text.