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SEC Commissioner Voices Opposition to Scheme Liability in Fordham Speech


Paul S. Atkins, commissioner with the Securities and Exchange Commission, visited Fordham Law School in October.
Photo by Ben Asen

In a speech at Fordham University Law School on Oct. 9, Securities and Exchange Commissioner Paul S. Atkins said he is opposed to so-called scheme liability, or the ability of shareholders to sue third parties, such as investment banks and law firms, for another company’s fraud.

Atkins, the guest speaker at the annual A.A. Sommer Jr. lecture, came on the same day as an op-ed article he wrote appeared in the Wall Street Journal. In it, he outlined his views on a case before the Supreme Court, Stoneridge Investment Partners v. Scientific-Atlanta, that could decide whether shareholders are allowed to sue the law firms or banks. Attorneys and financial institutions like banks have been protected by a 1994 Supreme Court decision that says shareholders cannot recover money from firms and people who simply “aided or abetted” securities fraud.

Atkins told the gathering at McNally Amphitheatre that the stakes in the case, considered one of the most important securities cases in years, are very high.

“It could have huge repercussions,” Atkins said. “It could open up a huge potential liability. Sometimes, the urge to settle is stronger than it is to vindicate your rights. That could end up hurting the American economy.”

The annual lecture was established by Morgan, Lewis & Bockius, LLP, in honor of former partner, A. A. Sommer Jr., who served as an SEC commissioner from 1973 to 1976.

Atkins said Sommer, who he once worked with at the SEC, was “a great advisor” who was “immensely kind.”

“The SEC has seen many commissioners come and go in its 73 years, but I’m sure that even the newest securities practitioners have heard of Al Sommer Jr. and his legacy at the commission,” Atkins said. “Commissioner Sommer was extremely well regarded for his efforts to eliminate fixed commissions in the brokerage industry and his work in creating and overseeing an advisory committee on corporate disclosure.”


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