Petition for Rulemaking on COVID-19 Related Litigation

The U.S. Chamber of Commerce has submitted a petition to the Securities and Exchange Commission (SEC) urging regulatory action to address the surge in COVID-19-related securities litigation. The Chamber argues that the current legal framework, established by the Private Securities Litigation Reform Act (PSLRA), is insufficient to deter meritless, event-driven lawsuits that exploit pandemic-related disclosures and financial statements, placing undue burdens on businesses and capital markets.

The petition highlights how plaintiffs’ lawyers have increasingly filed lawsuits immediately following adverse events, such as stock drops linked to COVID-19 impacts, often with little investigation and questionable merit. These lawsuits, the Chamber contends, are driven by the potential for quick settlements and high defense costs, rather than genuine instances of fraud or misconduct, and threaten to overwhelm companies already facing unprecedented operational and financial uncertainty due to the pandemic.

To mitigate these risks, the Chamber calls on the SEC to expand safe harbor protections and regulatory exemptions for forward-looking statements and pandemic-related disclosures, and to require a heightened standard of proof for liability. By doing so, the Chamber believes the SEC can protect businesses from unjustified litigation, preserve access to capital markets, and ensure that resources are not wasted defending frivolous claims during a time of extraordinary economic stress.