SIFMA said that requiring an investor to show materiality at class certification should not prove unduly burdensome, adding that there are many practicable ways to show materiality. A plaintiff may analyze the total mix of information available to market participants by reviewing public information, including issuer disclosures and press reports. A plaintiff may submit evidence of an appropriate event study on the impact of an alleged misrepresentation on the market price of the security.
There are also policy reasons to require the establishment of materiality at class certification, contended SIFMA. For one thing there is the in terrorem effects of certifying a class on defendants, which is particularly pronounced in securities cases where amounts cam be very large. Requiring only allegations of materiality at class certification would substantially hinder a defendant’s ability to dispute non-meritorious claims before being subjected to overwhelming settlement pressure.
A rigorous analysis at the class certification stage allows federal courts to fairly and efficiently manage cases that are not suitable for class treatment. Further, allowing a class to be certified despite the availability of dispositive evidence refuting a claim of materiality would unnecessarily increase the costs of defending meritless suits and exacerbate the problem of in terrorem settlements of securities cases.