Tuesday, June 19, 2007

Supreme Court's decision: not a setback for investors

The Supreme Court ruled in favor of Wall Street banks on a class-action lawsuit over the banks' alleged conduct on IPOs during the tech bubble.

The banks in question:

- Credit Suisse

- Bear Stearns

- Citigroup

- Goldman Sachs Group

were accused of creating illegal "tie-ins" and "laddering" agreements by investors. The investors alleged that preferred customers were allowed to buy hot technology stocks if a buyer agreed to purchase more shares of the stocks at higher prices and that such an arrangement artificially jacked up the price of new stocks.

However, this commentary goes on to quote experts as saying that this isn't a big setback to investors. John Coffee, a Columbia University law professor, said that the ruling shouldn't greatly harm investors since the Securities and Exchange Commission can and does prosecute laddering.

"I don't think investors are exposed to any great risk by this," Coffee said in a telephone interview Monday. "The federal securities laws give investors ample remedies."

For further reading:

+ Check out the WSJ Law Blog's interview with Steve Shapiro, who represented the plaintiff investment banks.

+ There is also an excellent description of the SEC's legal status on this post, as it relates to the Wall St. banks case before the Supreme Court. An extract:

When it comes to litigation, the SEC has the authority to litigate its own cases, including appeals. Thus, a decision to participate as amicus in a case at the US court of appeals is something the SEC decides on its own, without any obligatory consultation with the Justice Department. This is what occurred in connection with the amicus brief filed in Simpson when it was before the Ninth Circuit.
With respect to litigation at the Supreme Court, however, the rules are different. In most instances, agencies do not have the authority to represent themselves before the Supreme Court. The general rule is that all litigation involving the US government at the Supreme Court is handled by the Solicitor General’s Office within the Department of Justice. The practices are not, however, uniform. The Federal Trade Commission, for example, may represent itself at the Supreme Court when the Solicitor General otherwise refuses to do so. See 15 USCS § 56. The Commission, however, has no such authority and may not, without approval, litigate before the Supreme Court.
Thus, to get its views before the Court, the SEC must convince the Solicitor General’s Office to file the certiorari petition or amicus brief.

1 comment:

Jay Brown said...


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