A New Standard for Aiders and Abettors under the Private Securities Litigation Reform Act of 1995
![handle is hein.journals/busl52 and id is 19 raw text is: A New Standard for Aiders and Abettors Under
the Private Securities Litigation Reform Act of
1995
By Lewis D. Lowenfels and Alan R. Bromberg*
INTRODUCTION AND BACKGROUND
The Private Securities Litigation Reform Act of 1995 (Litigation Re-
form Act) became law on December 22, 1995 when the U.S. Congress
overrode President Clinton's veto. ' The principal purpose of this legislation
is to combat perceived abuses in the securities litigation process and par-
ticularly to curb frivolous strike suits, coercive settlements, and excessive
legal fees which have become prevalent throughout this process. While
much of the attention throughout the legislative maneuvering focused
upon reforming the conduct of class actions, issues of proportionate lia-
bility, and establishing a new safe harbor to protect against liability in
private actions arising from forward-looking statements, considerable de-
bate surrounded the issue of liability for aiders and abettors of securities
violations.2
For over twenty years prior to April 19, 1994, suits against aiders and
abettors of violations under the federal securities laws had been the most
widely used theory to hold nonprivity parties responsible for such viola-
tions. These suits had been initiated primarily in three different types of
actions: (i) private damage actions brought by private parties in federal
*Lewis D. Lowenfels, A.B., Harvard University, LL.B., Harvard University, is a partner in
the New York law firm of Tolins & Lowenfels; Public Governor of the American Stock
Exchange 1993-1996; adjunct professor of law, Seton Hall University School of Law; co-
author with Alan R. Bromberg of SECURITIES FRAUD AND COMMODITIES FRAUD (1996),
a six-volume treatise published by Thomson Legal Publishing.
Alan R. Bromberg, A.B., Harvard University,J.D., Yale University, is a University Distin-
guished Professor of Law, Southern Methodist University; of counsel, Jenkins & Gilchrist, a
professional corporation; co-author with Lewis D. Lowenfels of SECURITIES FRAUD AND
COMMODITIES FRAUD (1996), a six-volume treatise published by Thomson Legal Publishing.
1. Pub. L. No. 104-67, 109 Stat. 737 (1995) (to be codified in scattered sections of 15
U.S.C.) [hereinafter Reform Act]. The Act became law on December 22, 1995 when Con-
gress overrode the President's veto. See 141 CONG. REC. S19,1180 (daily ed. Dec. 22, 1995);
id. at H15,214 (daily ed. Dec. 20, 1995) (President Clinton's veto message).
2. S. REP No. 104-98, at 22, 51 (1995), reprinted in 1996 U.S.C.C.A.N. 679, 701, 729.](ViewImageLocal?handle=hein.journals/busl52&div=8&collection=&method=preview&ext=.png&size=3)
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A New Standard for Aiders and Abettors under the Private Securities Litigation Reform Act of 1995
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