Tuesday, February 13, 2007

SEC: Friend Of Corporations

The Securities and Exchange Commission has begun to take steps on two fronts to protect corporations, executives and accounting firms from investor lawsuits that accuse them of fraud.

Last Friday, the commission filed a little-noticed brief in the Supreme Court urging the adoption of a legal standard that would make it harder for shareholders to prevail in fraud lawsuits against publicly traded companies and their executives.

At the same time, the agency's chief accountant told a conference that it was considering ways to protect accounting firms from large damage awards in cases brought by investors and companies.

Critics said that the moves signaled a major retrenchment from the post-Enron changes and showed that a lobbying push by big companies, Wall Street firms and the accounting industry was gaining traction as they seek to roll back what they see as onerous regulation and excessive investor litigation. ...

Institutional investors and some analysts expressed alarm at the developments, noting that the number of shareholder lawsuits was declining significantly. "It is clear from these actions that this is a commission intent on reversing seven decades of rule making, by Democrats and Republicans, that have protected investors and opposed shielding auditors," said Lynn E. Turner, a former chief accountant at the commission and the managing director of research at Glass Lewis, an adviser to large shareholders. "This administration and this agency are very pro-business and anti-investor."

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