SEC Commissioner Paul Atkins adds his voice in the WSJ to the large chorus of sensible people objecting to civil scheme liability:
In Stoneridge,the Supreme Court held that investors in one company cannot sue other companies for securities fraud unless those other companies did something that the plaintiffs specifically relied on when making investment decisions. The court warned that if it adopted the plaintiffs' concept of reliance, the "cause of action would reach the whole marketplace in which the issuing company does business." In other words, had Stoneridge gone the other way, plaintiffs would be able to reach into the pockets of customers, vendors and other firms that simply do business with companies that defraud investors.
Regardless, Stoneridge sparked an outcry from those arguing that in the name of "fairness" and "justice" someone should be forced to pay if the primary wrongdoer cannot. This outcry could lead to demands on Congress to rewrite the securities laws to give plaintiffs like those in Stoneridge what they could not get in court -- the ability to reach into a deep pocket regardless of culpability. But justice is not merely finding someone who can pay. Exposing one company to class-action lawsuits because another company defrauded its investors is not fair or just to shareholders who shoulder the burden of class-action settlements.