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.