Because most securities class actions settle, the statutory limitations on damages that plaintiffs are allowed to recover following a favorable verdict are often overlooked. Those limitations, however, can be surprisingly large, and understanding them can improve defendants’ negotiating position in the vast majority of cases that actually settle.

There are two statutory limitations on damages found in the 1934 Securities Exchange Act: (1) Section 28(a)’s “actual damages” limitation and (2) Section 21D(e)(1), commonly called the “90-day bounce-back” rule, which was added as part of the Private Securities Litigation Reform Act’s amendments and which limits plaintiffs to a form of nominal losses.

Originally published in Law360, New York on August 12, 2015.