Paulson Committee Roundup

There has been plenty of news related to the Paulson Committee and its potential securities litigation recommendations over the past two weeks.

(1) John Thain, the head of the New York Stock Exchange, called class action suits “a tax on all companies and ultimately consumers” and expressed support for the Paulson Committee’s potential tort reform recommendations.

(2) Professor John Coffee used his New York Law Journal column (Nov. 16 – subscrip. req’d) to clarify that he did not recommend to the Paulson Committee (as had been reported) that the SEC dis-imply a private right of action under Rule 10b-5. Instead, his more modest proposal is that the SEC “adopt an exemptive rule under § 36 of the Securities Exchange Act of 1934 that would shield a non-trading public corporation from liability for monetary damages under Rule 10b-5.” In other words, plaintiffs would have to look to corporate officers and agents (e.g., auditors and underwriters) for their securities fraud recovery.

(3) Finally, Treasury Secretary Paulson gave a speech on Monday arguing that excessive regulation and burdensome litigation were prompting companies to choose to list their stock on foreign exchanges rather that U.S. exchanges. According to the New York Times report, Paulson “did not speak about some proposals expected to be made by the two business groups to limit shareholder lawsuits,” but did suggest that he was sympathetic to limiting auditor liability.

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