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| Author | : Assaf Hamdani |
| Publisher | : |
| Total Pages | : 66 |
| Release | : 2003 |
| Genre | : Accountants |
| ISBN | : |
Discusses third-party liability, especially the liability of "gatekeepers" (such as accountants, auditors, underwriters, lawyers, etc.) for a client's misconduct.
| Author | : Andrew F. Tuch |
| Publisher | : |
| Total Pages | : 23 |
| Release | : 2017 |
| Genre | : |
| ISBN | : |
Gatekeeper liability - the framework under which actors such as law firms, investment banks and accountants face liability for the wrongs committed by their corporate clients - is one of the most widely used strategies for controlling corporate wrongdoing. It nevertheless faces well-recognized flaws: gatekeepers often depend financially on the clients whose conduct they monitor; to carry out their gatekeeping function, gatekeepers rely on individuals - often their employees - whose interests diverge from their own; and major transactions typically involve multiple gatekeepers, each with specific areas of expertise and information, which produces both gaps and overlaps in the gatekeeping net.In this paper, I assess a recently proposed strategy intended to address the core challenges that afflict gatekeeper liability. Proposed by Professor Stavros Gadinis and Mr. Colby Mangels in "Collaborative Gatekeepers," 73 Wash. & Lee L. Rev. 797 (2016), the strategy would require gatekeepers to report their suspicions of wrongdoing by their clients to regulators - a duty that is analogous to rules that have proven effective in anti-money laundering regulation. I assess the proposal's likely effectiveness by, first, distinguishing it from conventional gatekeeping regimes. I argue in favor of the proposal but suggest that its success is likely to depend on the particular ways in which it interacts with conventional gatekeeper regimes - because the proposal would be overlaid on these existing regimes, rather than amending or replacing them. I also examine the basic difficulty in justifying any gatekeeper liability regime that stems from the need to establish its superiority over more direct forms of liability - namely, individual and enterprise liability - a task that hinges on the satisfaction of numerous complex conditions that cannot be established - easily, or at all (at least to the satisfaction of those inclined to oppose new liability regimes). Arguing that the Gadinis-Mangels proposal nevertheless holds strong promise, I suggest an extension designed to overcome defects associated with the fragmentation of the gatekeeping net that results from the presence of multiple gatekeepers in major business transactions.
| Author | : John C. Coffee |
| Publisher | : Oxford University Press, USA |
| Total Pages | : 398 |
| Release | : 2006-06 |
| Genre | : Business & Economics |
| ISBN | : 0199288097 |
John Coffee traces the evolution of the four main gatekeeping professions: auditors, lawyers, securities analysts and credit-rating agencies, in the wake of corporate governance disasters, such as Enron and WorldCom.
| Author | : Gerhard Wagner |
| Publisher | : |
| Total Pages | : 30 |
| Release | : 2013 |
| Genre | : |
| ISBN | : |
The first financial crisis, triggered by the burst of the U.S. housing bubble, has many causes. One such cause is the failure of gatekeepers, i.e. accounting firms and rating agencies. Consequently lawmakers on both sides of the Atlantic tightened the regulatory regimes for accountants and rating agencies, following the same path they had walked earlier, in response to financial scandals such as the one involving Enron and Worldcom. However, the liability rules for these institutions remained untouched once again so that accountants and rating agencies continue to work under skewed liability regimes. Incentives to err on the side of customers remain strong and unbalanced by adequate liability towards third parties. This article explores legislative strategies for a more symmetrical liability regime. In doing so, it takes a critical view of the recent EU Regulation No. 462/2013.
| Author | : Frank Partnoy |
| Publisher | : |
| Total Pages | : 9 |
| Release | : 2004 |
| Genre | : |
| ISBN | : |
This article responds to a proposal by Professor John C. Coffee, Jr. for a modified form of strict liability for gatekeepers. Professor Coffee's proposal would convert gatekeepers into insurers, but cap their insurance obligations based on a multiple of the highest annual revenues the gatekeepers recently had received from their wrongdoing clients. My proposal, advanced in 2001, would allow gatekeepers to contract for a percentage of issuer damages, after settlement or judgment, subject to a legislatively-imposed floor. This article compares the proposals and concludes that a contractual system based on a percentage of the issuer's liability would be preferable to a regulatory system with caps based on a multiple of gatekeeper revenues.Both proposals mark a shift in the scholarship addressing the problem of gatekeeper liability. Until recently, scholarship on gatekeepers had focused on reputation - not regulation or civil liability - as the key limitation on gatekeeper behavior. Indeed, many scholars have argued that liability should not be imposed on gatekeepers in various contexts, and that reputation-related incentives alone would lead gatekeepers to screen against fraudulent transactions and improper disclosure in an optimal way, even in the absence of liability. From a theoretical perspective, this article is an attempt to move the literature away from a focus on reputation to an assessment of a potential reinsurance market for securities risks, where gatekeepers would behave more like insurers than reputational intermediaries.
| Author | : Frank Partnoy |
| Publisher | : |
| Total Pages | : 44 |
| Release | : 2004 |
| Genre | : |
| ISBN | : |
This article attempts to fill 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 (investment banking, accounting, and law firms) 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 would be permitted to limit their liability by agreeing to and disclosing a percentage limitation on the scope of their liability for the issuer's damages.For example, a gatekeeper for an issue might agree ex ante to be strictly liable for 10 percent of the issuer's liability related to the issuance, measured by the present value of any payment by the issuer pursuant to a settlement or judgment. A particular gatekeeper's liability would be limited to the issuer's liability related to that gatekeeper's role (e.g., counsel for the issuer or the underwriters generally would not be liable for material misstatements or omissions in audited financial statements). The percentage for each gatekeeper could range based on competitive bargaining and market forces, with a minimum limit (e.g., the amount of the gatekeeper's fee, or perhaps a fixed amount of 1 to 5 percent) set by law. This modified strict liability proposal is intended to solve two important and parallel problems in securities regulation. The first problem is the rapidly increasing and substantial costs related to the role of gatekeepers in securities fraud, including both the costs of behavior designed to capture the benefit of due diligence-based defenses and - more importantly - the costs of resolving disputes about gatekeeper behavior. The second problem is that the value of gatekeeper certification is declining at the same time costs are increasing. The article gathers evidence to demonstrate these two problems, and shows how a strict liability regime might ameliorate them. Throughout this discussion, the article challenges the assumption that gatekeepers act as reputational intermediaries.
| Author | : Ke Steven Wan |
| Publisher | : |
| Total Pages | : 0 |
| Release | : 2011 |
| Genre | : |
| ISBN | : |
Recent cases have reignited debate on vicarious liability for gatekeepers providing essential services such as electronic payment processing services. Generally speaking, gatekeeper liability is undesirable when a gatekeeper lacks the right and ability to control infringement. A monopolistic gatekeeper of an essential service, however, is able to exclude infringers from its service network, which may act as an effective deterrence. Thus, although a monopolistic gatekeeper is not able to control infringement directly, it can deter infringers by threat of exclusion. This Article sets forth different prongs for vicarious liability based on three types of relationships: that of employers to their employees, that of premises providers to their tenants, and that of monopolistic providers of essential services to their users. Taking Baidu, Tiffany v. eBay, and Perfect 10 v. Visa as examples, this Article discusses the desirability of monopolistic gatekeepers' vicarious liability for copyright infringement and explores the rationales for it, such as deterrence and corrective justice. This Article also proposes a liability regime for monopolistic gatekeepers to balance their risk with the need to prevent infringement.
| Author | : Klaus J. Hopt |
| Publisher | : Walter de Gruyter |
| Total Pages | : 476 |
| Release | : 2012-08-28 |
| Genre | : Law |
| ISBN | : 3110871114 |
| Author | : Andrew F. Tuch |
| Publisher | : |
| Total Pages | : 58 |
| Release | : 2015 |
| Genre | : |
| ISBN | : |
In many areas of regulation, rules require one person to act with loyalty to another person, or at least constrain one person's pursuit of self-interest by restricting the extent to which that person may act in conflict with the interests of another person. These rules are typically justified on the basis of reducing (economic) agency costs. However, recently-adopted provisions in the Dodd-Frank Wall Street Reform and Consumer Protection Act, which include the so-called Volcker Rule, impose such conflict of interest rules on underwriters selling securities to investors, including sophisticated investors - a context in which agency costs do not arise. This article draws on the extensive literature on gatekeeper liability theory to develop a justification for imposing conflict of interest rules in these arm's length relationships between underwriters and investors. The article argues that conflict of interest rules provide incentives to underwriters (as gatekeepers) to take greater precautions to deter disclosure errors by their clients, the issuers of the securities sold by underwriters, than underwriters would take otherwise and that these rules thus supplement, or serve as an alternative to, rules of gatekeeper liability. The article assesses whether this justification applies to the Volcker Rule.The article also uses as a case study a deal involving alleged conflicts of interest by Goldman Sachs in marketing the ABACUS 2007-AC1 collateralized debt obligation. That deal became the subject of highly publicized enforcement action by the SEC in 2010 and provided significant impetus in the adoption of the Volcker Rule. The article shows how the justification developed in this article for imposing conflict of interest rules informs our understanding of the propriety of Goldman Sachs' conduct in the ABACUS deal and assists in applying and interpreting the Volcker Rule.
| Author | : Reinier Kraakman |
| Publisher | : OUP Oxford |
| Total Pages | : 578 |
| Release | : 2009-07-23 |
| Genre | : Law |
| ISBN | : 0191582778 |
This is the long-awaited second edition of this highly regarded comparative overview of corporate law. This edition has been comprehensively updated to reflect profound changes in corporate law. It now includes consideration of additional matters such as the highly topical issue of enforcement in corporate law, and explores the continued convergence of corporate law across jurisdictions. The authors start from the premise that corporate (or company) law across jurisdictions addresses the same three basic agency problems: (1) the opportunism of managers vis-à-vis shareholders; (2) the opportunism of controlling shareholders vis-à-vis minority shareholders; and (3) the opportunism of shareholders as a class vis-à-vis other corporate constituencies, such as corporate creditors and employees. Every jurisdiction must address these problems in a variety of contexts, framed by the corporation's internal dynamics and its interactions with the product, labor, capital, and takeover markets. The authors' central claim, however, is that corporate (or company) forms are fundamentally similar and that, to a surprising degree, jurisdictions pick from among the same handful of legal strategies to address the three basic agency issues. This book explains in detail how (and why) the principal European jurisdictions, Japan, and the United States sometimes select identical legal strategies to address a given corporate law problem, and sometimes make divergent choices. After an introductory discussion of agency issues and legal strategies, the book addresses the basic governance structure of the corporation, including the powers of the board of directors and the shareholders meeting. It proceeds to creditor protection measures, related-party transactions, and fundamental corporate actions such as mergers and charter amendments. Finally, it concludes with an examination of friendly acquisitions, hostile takeovers, and the regulation of the capital markets.
