Limiting the Plaintiff Class: Rule 10b-5 and the Federal Securities Code

The Penn Central litigation, involving a large, publicly held corporation, illustrates the need to examine the reach of the federal antifraud provisions. This Note discusses the problem of defining the plaintiff class when the number of past and present shareholders who are potential plaintiffs is very great. Attention will center on the methods courts have used to limit the class of investors compensable under rule 10b-5. Also, the effect that enactment of present drafts of the American Law lnstitute’s proposed Federal Securities Code would have on the composition of the plaintiff class in analogous actions will be discussed. Finally, the Note assesses the viability of the private compensatory remedy in light of the difficulties that plague the limitation of the plaintiff class in rule 10b-5 actions.