Specter Bill Would Allow Investors To Sue Accomplices Of Corporate Fraud
In the future, investors may be the benefactors of a welcome shot in the arm thanks to recently introduced legislation that would make it easier for them to sue accountants, marginal financial players, investment banks and other entities that act as accomplices of securities and investment fraud. The measure, which was unveiled July 30 on the Senate floor by Sen. Arlen Specter, could significantly change recent Supreme Court limits on such cases.
“It would be an appropriate change,” said Donald Langevoort, a securities law professor at Georgetown University, in an Aug 4 article by Bloomberg. “Secondary actors who play a big enough role in perpetrating a fraud should bear responsibility just like anyone else and shouldn’t be able to hide.”
“There’s a lot of investor anger, especially against major players on Wall Street, and aiding and abetting liability taps right into that,” Langevoort said in the story.
If passed, the bill would reverse the Supreme Court’s 2007 decision in Stoneridge Investment Partners LLC v. Scientific-Atlanta Inc. In that case, the Supreme Court ruled in a 5-3 vote that shareholders could not sue third parties that “assisted” in a fraud committed by the company whose stock they own.
That ruling ultimately left many investors with no legal recourse, while at the same time essentially giving selected individuals a free pass to commit fraud.
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