Access to Justice
The United States is an outlier in the sense of permitting private enforcement of violations of securities laws principally, but not exclusively, through class action lawsuits. While not entirely unknown in the European Union, the class action lawsuit, in conjunction with contingent legal fees, plays a significant role in evaluating the full magnitude of enforcement disparity between the United States and European Union. Private monetary sanctions far exceed public monetary sanctions as illustrated by figures based statistics from 2000-2002.
| Public Monetary Sanctions | Private Monetary Sanctions |
| SEC Monetary Sanctions: $801,333,333 | Class Action Settlements: $1,906,333,333 |
| State Monetary Sanctions: $931, 212, 489 | Class Action Trial Awards: $17,626,000 |
| NASD Disciplinary Sanctions: $126,110,622 | NASD Arbitration Awards: $104,000,000 |
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The virtues of class action lawsuits are debatable, and in many instances dubious filling the coffers of law firms, and providing trivial compensation to investors. However, the threat of these suits act as a deterrent. The permission to contract legal services by contingency fee arrangements gives small investors access to the courts that they otherwise would be denied. In addition, the general rule of the United States that each party bears its costs, does not have the chilling effect upon bringing an action against a large corporation, bank or investment firm. A loser pay rule, as is common in the European Union, virtually closes the door on retail investors to pursue remedies in court.
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