A Study on the Securities Class Action-Focuses on the abuse Prevention-
Individual minority shareholder would hesitate to bring individual lawsuits against a large enterprise where, with regard to sale of securities or other transaction, it engaged in commercial wrongdoing such as window-dressing, fraudulent audit, false disclosure, and trading by insider, and thus caused injury to them. The reason can be found the fact that the costs of individual law suits against a large company outweigh their benefits from their perspectives. Hence, many actions alleging injury to holder, purchasers or sellers of securities need to be brought as class actions because the total damage to all investor may be quite signifiant. Securities class actions suits enable minority shareholders to rely on regal remedies and courts save their time and efforts. For these reasons enumerated above, Securities Class Action act was enacted in Korea.
The enactment and enforcement of the Act afford more efficient legal remedies to many minority shareholders incurring damage by tortious acts of a company which issued securities. On the other hand, the adoption of the act places a new burden on companies and makes commerce dwindled when securities class actions are abused. In order to prevent the abuse of securities class actions mentioned, the Act provide direct and indirect hedges against their abuse.