This Article examines the use of confidential witnesses (“CWs”) in investigating and substantiating securities fraud claims. The Private Securities Litigation Reform Act has placed a heavy burden on plaintiffs at the pleading stage, which has caused plaintiffs to perform preliminary investigations and seek confidential information as a basis for their allegations in the complaint. Testimony of CWs is often the centerpiece of the evidence substantiating plaintiffs’ securities fraud claims. As a result, the investigation conducted prior to filing an amended complaint has become a central issue in the realm of securities litigation, subject to attack by the defendants. This Article discusses the legal and ethical considerations for contacting former employees of the defendants who may become “confidential informants” that provide invaluable information for substantiating securities fraud claims. The Article further discusses defendants’ tactics in attacking the method of plaintiffs and their counsel’s investigation, subjecting both lead plaintiff and lead counsel to motions for sanctions for alleged Rule 11 violations pertaining to the parties’ representations in court. The Article provides advice on defending these motions and conducting thorough investigations prior to filing an amended complaint.

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