Wednesday, August 5, 2009
Senator Specter introduced a Bill that would amend section 20 of the Securities Exchange Act to allow private Rule 10b-5 actions against persons that knowingly or recklessly provide substantial assistance to primary violators, thus overturning Central Bank and Stoneridge. In his accompanying remarks, Senator Specter referred to Judge Lynch's recent call, in the Refco opinion dismissing the charges against outside counsel, to re-examine the issue in light of the fact that secondary actors sometimes are "deeply and indispensably implicated in the wrongful conduct."
In response, the U.S. Chamber issued a press release, warning that expansion of private securities litigation "will only slow our economic recovery, drag down investors' portfolios and retirement accounts, and delay the creation of much needed jobs."
While the Administraton's proposed legislation would expand the scope of the SEC's power to impose aiding and abetting liability, it does not address a private remedy.