Arthur Levitt becomes new SEC chairman.
"The SEC exists to protect the integrity of the world's greatest financial marketplace," said Levitt, former chairman of the American Stock Exchange (Amex). He pledged his first goal would be "to maintain that protection for the public investor." Levitt replaced former SEC chairman Richard Breeden, now a partner at Coopers & Lybrand.
Caution on litigation reform. In confirmation hearings before the Senate Banking, Housing and Urban Affairs Committee, Levitt spoke about the rising tide of securities litigation. "I have experienced the pain and the cost of this litigation," he told the committee. "I will work to see if we can come up with a solution." He also questioned whether frivolous suits were being attacked aggressively enough in the courts.
However, Levitt was cautious when asked about proposals to replace the joint and several liability standard (holding codefendant third parties with "deep pockets" liable for losses based on their ability to pay) with proportionate liability (in which judgments against codefendants are based on their relative contributions to claimed losses). Securities reform legislation requiring the use of proportionate liability is supported by the American Institute of CPAs.
The new SEC chairman said he was concerned such proposals would "fundamentally alter" securities litigation and "could make it impossible for defrauded investors who prevail at trial to fully recover their losses."
Levitt also was weary of proposals to limit liability to parties that deliberately commit fraud for their own personal benefit. "Such a rule," he said, "essentially would limit aiding and abetting liability to circumstances in which a defendant receives a bribe. I expect few cases involving professional advisers would meet this test."
Before serving as Amex chairman from 1978 to 1989, Levitt worked for 16 years on Wall Street: From 1969 to 1978 he was president and director of Shearson Hayden Stone, Inc. (now Smith Barney Shearson). He also served on several government task forces, including a stint as chairman of the White House Small Business Task Force from 1978 to 1980.
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|Publication:||Journal of Accountancy|
|Article Type:||Brief Article|
|Date:||Oct 1, 1993|
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