The provisions of the Act only apply to public companies. It is intended to reduce the incidence of securities fraud lawsuits by eliminating the use of professional plaintiffs, providing that discovery activities be stopped barring a motion to dismiss, and gives courts the authority to require the parties to a lawsuit to post a bond for legal costs. It also introduced the concept of proportionate liability, which allows a monetary judgment to be allocated to various parties based on their proportionate share of the liability; this tends to reduce the liability of parties to a lawsuit who have no direct share in company activities, such as outside directors and auditors. The Act also protects companies from liability when they make forward-looking statements, as long as those statements are accompanied by cautionary verbiage. It also requires auditors to add some audit procedures and to inform the SEC under certain circumstances when they become aware of illegal activities being conducted by a client.
Private Securities Litigation Reform Act of 1995