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SEC Commissioner Voices Opposition to Scheme Liability


In a speech at Fordham University Law School on Tuesday, 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.

Paul S. Atkins Photo by Ben Asen Photography

His presentation at Fordham came on the same day as an op-ed article written by Atkins 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.


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