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Keywords

lawyers, securities, fraud, accountability

Abstract

Lawyers often play an integral part in business transactions and securities offerings. This puts lawyers on the sidelines of not only great business successes, but also, every so often, tremendous failures. Because they are viewed by many as gatekeepers, and in that role provide a degree of assurance (with their reputational capital) that gross illegalities will not occur, a series of questions arise in the minds of many when illegalities do happen on attorneys’ watch. This Note analyzes the legal standards that are in play and those that should be imposed when lawyers aid or abet a fraud. Part I sets out the historical and theoretical background against which the analysis of attorney liability is undertaken. This Part traces the relevant underlying principles and defines the unique position that a lawyer occupies under securities laws as he or she plays the dual role of client advocate and corporate gatekeeper. It then discusses the changes to attorney liability that were brought about by judicial decisions and legislative actions over the past two decades. Part II discusses the contrasting views on the issue, both those calling for the reintroduction of aiding and abetting liability and those calling for a continuation of the status quo. Finally, Part III offers a new approach for resolving the debate, proposing a statutory amendment that balances competing policy considerations; specifically, the need for liability and the need to curb the potential explosion of litigation such liability may cause.

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