There is an interesting Reuters article on the nascent, but perhaps growing, movement to override the U.S. Supreme Court’s decision in the Central Bank case and restore aiding and abetting liability in private Rule 10b-5 cases. While the absence of aiding and abetting liability does not completely shield a company’s lawyers, accountants, and bankers from litigation risk, it does make it more difficult for investors to bring claims against them.
Legislation to restore aiding and abetting liability has been proposed in the House of Representatives (see this earlier post). Meanwhile, courts (notably in the Enron case) have begun to chip away at Central Bank’s holding by creating a broad definition of “primary violator.”
Quote of note: “Rolling back Central Bank of Denver to expose corporate advisers to more liability is favored by plaintiffs’ lawyers who bring suits on behalf of shareholders. ‘This rule is important … Many, if not, most frauds involve participation of a whole network of assistors,’ said Jon Cuneo, spokesman for the National Association of Shareholder and Consumer Attorneys.”