Critics of shareholder suits aim at big holders

There is a valid question to be raised about how shareholders injured by fraud should be compensated. The object of a shareholder suit is to make the company where fraud took place compensate those who held the stock and lost money when the fraud was revealed. That, of course, is a detriment to current holders of shares that were bought before the fraud was revealed. "There's an asymmetry built into the system, where we compensate people for alleged trading losses, but trading gains you get to keep," said Anjan V. Thakor, a finance professor at Washington University in St. Louis who helped conduct the research.

But what Mr. Thakor called an asymmetry is a function of how securities lawsuits work and has nothing to do with institutional investors, said Christopher M. Patti, university counsel to the regents of the University of California.

If shareholders who lost money because of fraud were compensated in some other way, "the result of that kind of logic would be that a public company can never be responsible for its actions," he said.

•	Critics of Shareholder Suits Aim at Big Holders New York Times, Thursday, Oct. 27, 2005 Byline: Jonathan D. Glater

	Story also ran in 3 others:  Financial Times (UK), MSNBC and MSN Money