U.S. Senator Arlen Specter has introduced legislation that would allow investors to sue secondary actors such as law firms, accountants and investment banks that provide “substantial assistance” in a fraud. Bloomberg reports that the Specter legislation would undercut the Supreme Court’s rulings in Stoneridge Investment Partners LLC v. Scientific-Atlanta Inc. and Central Bank of Denver v. First Interstate Bank of Denver.
Donald Langevoort, a securities law professor at Georgetown University, said such a law would be an appropriate change, and that the Supreme Court’s Central Bank case that effectively shields secondary actors was a “major gift” to individuals and corporations that aided in a fraud.
Matthew Webb, senior vice president for legal reform policy at the U.S. Chamber of Commerce, told Bloomberg that under Specter’s legislation, there would not be “any real functional limit to who [plainitffs] could go after,” which may spur lawsuits.