OSCPA to Sen. Sherrod Brown: Aiding & abetting provision will hurt business

OSCPA met with Sen. Sherrod Brown, D-Ohio, last week to express concerns about a possible provision that would give plaintiffs' lawyers an expanded ability to sue third parties on claims of securities fraud. If the provision is passed, hundreds of CPAs and firms could be added to suits, not because their culpability, but because of their ability to pay.

The provision in question is included in a discussion draft entitled the “Restoring American Financial Stability Act of 2009.” Section 984 permits private rights of action for aiding and abetting under the securities laws. It also lowers the current legal standard for conduct in aiding and abetting cases. Under the proposed standard, an audit firm can be included in a lawsuit for “reckless” actions, which is vaguely defined as any action that aided a registrant’s fraud, even if the firm didn’t know such acts were contributing to fraud.

AICPA President and CEO Barry Melancon, CPA, sent a letter to Senate Banking Committee Chairman Christopher Dodd (D-Conn.) arguing the provision would overturn the Supreme Court's 2008 decision in "Stoneridge" and would undo reforms Congress enacted in 1995.

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