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Short-Selling Stock and the Plaintiffs' Bar: Evidence and Solutions

Tuesday January 2006


Moin A. Yahya Professor, University of Alberta, Canada

Lawsuits filed against companies can cause large drops in market value. There is some evidence that plaintiffs filing large securities class actions, and their attorneys, are profitably short-selling the stock of the companies they intend to sue.

Such actions by plaintiffs and their lawyers should be cause for concern, but the status of such short sales is currently undecided in the law. Neither plaintiffs nor their attorneys are traditional “insiders,” so they do not owe shareholders of defendant corporations fiduciary duties.

Moin Yahya, an economist and law professor, has published the seminal work exploring this area of law at the intersection of legal ethics and financial markets. In our luncheon forum, Professor Yahya will discuss his research and will propose the appropriate regulatory solutions to plaintiff and attorney short selling.