The 10b-5 Daily

At the Council of Institutional Investors fall meeting last week, New York State Comptroller Alan Hevesi proposed the formation of an activist group dedicated to promoting corporate governance reforms, regulation, and legislation. The group will be called the National Coalition of Corporate Reform (NCCR) and there are plans to have an organizing meeting in October. Other public institutions, along with the president of the AFL-CIO, have expressed their support for the proposed group.

Reuters ran an article on the proposal and Hevesi has issued a press release.

Quote of note: NCCR’s agenda, Hevesi announced, includes – “Lobbying efforts will target changes in the Private Securities Litigation Reform Act of 1995, the Sarbanes-Oxley Act of 2002, the Class Action Fairness Act of 2003, SEC regulations, and state laws, where imbalances exist with respect to shareholder rights and corporate obligations.”

With the recent announcement of an investigation by New York’s attorney general into mutual fund trading practices, there is little doubt that money management firms can expect a wave of securities class actions. Indeed, a number of cases have already been filed.

The 10b-5 Daily will be tracking and reporting the developments in these cases. In the meantime, the Los Angeles Times has a solid primer on what has happened so far.

A federal judge has approved Conseco, Inc.’s (OTCBB: CNCEQ) bankruptcy reorganization plan over the objections of counsel in the securities class action against the company. Conseco is an Indiana-based insurance company that has been dogged by finanical difficulties over the last few years. According to a report in the Indianapolis Star, the plan includes broad legal protections for directors and officers.

Quote of note: “[A]t least two parties — including plaintiffs of a yet-to-be-certified class-action suit against Conseco — filed similar last-minute objections. They questioned [Judge] Doyle’s authority to allow such broad releases as well as whether they actually served Conseco’s long-term interest. . . . Doyle countered that federal appeals courts do allow broad legal releases as long as they are consensual to all parties, while Conseco attorneys said the releases will save the company significant costs in time and money that would be spent on legal issues.”

A column by Maggie Mulvihill in yesterday’s Boston Herald concludes that the state government probes into the financial services industry have been a boon for the securities plaintiffs’ bar.

Quote of note: “Bill Galvin. Drew Edmondson. Elliot Spitzer. To big business, they are bloodsucking fiends intent on using corporate finance scandals to advance their own political positions. But to plaintiffs’ lawyers, these guys are a dream come true. Their state probes and lawsuits are already opening the floodgates of hard-to-get corporate data – not to mention emboldening civil litigators to start papering courthouses with lawsuits against the financial services industry.”