The McKinsey report commissioned by the two, "Sustaining New York's and the US' Global Financial Services Leadership," follows up on their earlier Wall Street Journal op-ed, argues that the recent decline in securities litigation is a blip of recent economic good times, that the litigation and regulation environment could cost New York tens of thousands of jobs, and, per Lyle Roberts, calls for the following reforms, inter alia:
- Limit the liability of foreign companies with U.S. listings to damages that are proportional to their degree of exposure to the U.S. markets;
- A cap on auditors' liability;
- Easing Sarbanes-Oxley regulation;
- Arbitration as an alternative dispute resolution system for securities grievances;
- Limits on punitive damages (called "critically important"); and
- Interlocutory appeals in federal securities actions.
That last procedural reform (seen successfully also in the context of the Class Action Fairness Act) cannot be underestimated: billions of dollars of wealth has been extorted by trial lawyers because of outlier district court decisions that cannot be appealed for years and without taking the risk of a bankrupting trial court verdict. Possibly problematic: the creation of a "National Commission on Financial Market Competitiveness" bureaucracy. The Wall Street Journal, NY Sun, NY Post, and Kevin Lacroix note the irony of Governor Spitzer showing up for the unveiling of the report, given that his AG regime is the source of many of the problems identified in the report. (Larry Ribstein, however, notes that Spitzer pulled any specific criticism of his role or of attorneys general from the report.) Press coverage: WSJ; Financial Times; NY Sun; NY Times; and Newsday. Blogosphere: Ribstein; Oesterle; Roberts; Lacroix; Mitchell at Cato; ShopFloor; The Economist; and Dealbreaker.