Barbarians at the Gatekeepers?: A Proposal for a Modified Strict Liability Regime

Abstract

This Article fills a few of the gaps in current scholarship about gatekeepers and sets forth a proposal for a modified strict liability regime that would avoid many of the problems and costs associated with the current due diligence-based approaches. Under the proposed regime, gatekeepers would be strictly liable for any securities fraud damages paid by the issuer pursuant to a settlement or judgment. Gatekeepers would not have any due diligence based defenses for securities fraud. Instead, gatekeepers could limit their liability by agreeing to and disclosing a percentage limitation on the scope of their liability for the issuer’s damages.

Keywords

Lawyers -- Malpractice, Accountants -- Malpractice, Strict liability, Moody's Investors Service Inc., Underwriters Laboratories Inc., Accounting services, Investment banks, Securities fraud, Securities Act of 1933

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Frank Partnoy (University of San Diego School of Law)

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