Specter's "Aiding and Abetting" Bill: Why It Could Pass and Why It Matters

Specter's "Aiding and Abetting" Bill: Why It Could Pass and Why It Matters - 9/21/2009 , Class Action News, Class Action, Securities News, shareholder class action, claim, litigation, securities action, common stock'>

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Specter's "Aiding and Abetting" Bill: Why It Could Pass and Why It Matters
Kevin LaCroix

The D & O Diary. September 21, 2009
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EXCERPT: […] Senator Arlen Specter proposed on July 30, 2009 when he introduced Senate Bill 1551, "The Liability for Aiding and Abetting Securities Violations Act of 2009." If enacted, the bill would, in effect, legislatively overturn Stoneridge by amending the securities laws to allow private litigation against a person that provides "substantial assistance" in violation the securities laws. On September 17, 2009, the bill had its first committee hearing at a session of the Subcommittee on Crime and Drugs of the United States Senate Committee on the Judiciary. […] A September 18, 2009 memorandum by Leslie Platt and Kimberly Melvin of the Wiley Rein law firm provides excellent and detailed summary of the Subcommittee’s proceedings. Of particular interest among the witnesses’ written statements is the testimony of University of Michigan Law Professor Adam Pritchard opposing the bill, and the testimony of Columbia Law Professor John Coffee supporting the bill, subject to certain suggested amendments. Professor Coffee suggests that "it is anomalous that one could be criminally liable of aiding and abetting by not civilly liable for the same conduct in a private suit." He also argues that allowing private suits for aiding and abetting would be "the most realistic means to prevent misconduct," because it would "deter those who have less to gain" from fraudulent misconduct, who also have "the ability to block the transaction." Professor Pritchard by contrast argues that the bill would "tear down the safeguards" instituted in Central Bank and Stoneridge, "creating the potential for the securities laws to be injected in a wide range of ordinary commercial transactions." Enacting the bill would also, Professor Pritchard contends "undermine the United States’s international competitiveness and raise the cost of capital." The goal of the bill, he contends, is simply "to rope in more ‘deep pocket’ defendants to feed the plaintiff’s bar’s lucrative class action machine."

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