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MARK AUSTIN THOMAS: The SEC is looking for ways to protect corporations and accounting firms accused of fraud. It wants to set a legal standard for lawsuits and limit awards, but does that move the agency away from its mission to protect investors? Marketplace’s Steve Tripoli has that story.
STEVE TRIPOLI: Business and accounting interests want investors to prove a “high likelihood” of illegal intent by companies before they sue. They’re tired of making large damage awards, and defending themselves against what they say are frivolous lawsuits.
Accounting firms are especially vulnerable. But securities law professor Jill Fisch says the idea of capping damages against accountants won’t help anyone.
JILL FISCH: Either the caps have to be so low that you remove accountability of accounting firms for wrongdoing, or they’re high enough that it doesn’t meaningfully change their exposure if they engage in serious wrongdoing.
Thanks to consolidation, there are only four big accounting firms left. The SEC says unless the standards on lawsuits change, that number could shrink further.
Investor groups say their protections are being eroded, but the SEC argues it’s trying to encourage competition, and prevent business from going overseas.
I’m Steve Tripoli for Marketplace.
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