There has been much more on the Committee on Capital Markets Regulation (a.k.a. the Paulson Committee) and its potential litigation recommendations in the Wall Street Journal this week.
(1) An op-ed (subscrip. req’d) in Monday’s edition, written by two Committee members, discussed the Committee’s concerns and goals.
Quote of note: “In addition to regulation and accounting standards, the liability system can also affect the competitiveness of U.S. markets. Firms are sometimes confronted with circumstances in litigation, including securities class-action suits, where even a small probability of loss, given the size of claims, could result in bankruptcy. Consequently, companies often must agree to large settlements that result in reduced value for shareholders rather than pursuing a successful outcome on the merits of its case.”
(2) An article (subscrip. req’d) in Wednesday’s edition discussed the desire of accounting firms to limit the potential liability for their audit work and the Committee’s possible recommendations on this issue.
Quote of note: “Recognizing, though, that auditor liability overhaul might be a tough sell on Capitol Hill, the committee may suggest that the U.S. Securities and Exchange Commission come up with a solution, Mr. Scott said. ‘The SEC could modify their own rules regarding liability,’ he added. One idea under study: Allowing accounting firms to negotiate liability caps with clients, a practice now barred to preserve auditors’ independence.”