Something has been overlooked a bit in Judge Jed Rakoff's rejection of the SEC's $33 million settlement with Bank of America: The whole concept of shareholder suits. 

One reason the judge rejected the deal was that the $33 million would be paid for by shareholders. Those shareholders were in fact the victims. So why should they be penalized? This has wide-ranging implications, given the long-standing practice of settling shareholder suits in precisely this fashion.

Judge Rakoff's anger is understandable, but perhaps a system-wide fix is needed. Business Week notes: "The value of settlements in such cases can dwarf those obtained by federal and state regulators, and there is widespread agreement among legal scholars that these class actions make little economic sense and are anemic deterrents to fraud."   

For more:
- here's the article

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