Tort liability of accounting firms for securities misrepresentation

Yuting  Wang

doi:10.54691/bcpbm.v33i.2848

Authors

Yuting Wang

DOI:

https://doi.org/10.54691/bcpbm.v33i.2848

Keywords:

Securities misrepresentation; joint and several liability; accounting firm; proportional joint and several liability.

Abstract

A securities misrepresentation tort case could be complex since it not only involves multiple subjects but also involves some reasonable presenting documents mixed-use, which makes it difficult to delineate the liability based fully on the evidence. What is a fair way to distribute liability in a securities misrepresentation tort case where the disclosure obligor knowingly provided false audit material and the accounting firm failed to effectively identify it? This paper, using case study approach and comparative study, after a comparative analysis between the relative regulations of the US and China, indicates a tendency of proportionate joint and several liability and further proposes steps to develop proportionate joint and several liability for accounting firms. The limitation of the liability of accounting firms is not for self-protection but to align the interests of issuers with those of listed companies, securities intermediaries, and investors.

Downloads

Download data is not yet available.

References

Sung Hui Kim, Gatekeepers Inside Out, 21 GEO. J. LEGAL ETHICS 411, 413 (2008)

Shu Guoying, An Introduction to Jurisprudence, (2nd ed.), Peking University Press, 2012.

Cheng Xiao, Liability for Damages in Tort of Misrepresentation in the Securities Market, People's Court Press, 2004.

Zhou Chun, Misrepresentation in Securities Issuance: Identification and Reflection on Intermediaries' Fault Liability", in Securities Market Herald, No. 7, 2021

Victor E. Schwartz, Phil Goldberg, Christopher E. Appel, Deep Pocket Jurisprudence: Where Tort Law Should Draw the Line, 70 Okla. L. Rev. 359 (2017-2018)

Huck v. Wyeth, Inc., 850 N.W.2d 353, 380 (Iowa 2014) (quoting Victor E. Schwartz et al., Warning: Shifting Liability to Manufacturers of Brand-Name Medicines When the Harm Was Allegedly Caused by Generic Drugs Has Severe Side Effects, 81 FORDHAM L. REV. 1835, 1872 (2013))

Coase. The Problem of Social Cost〔J〕. The Journal of Law ＆ Economics，1960，(3) : 1 － 44．

Wang Zhu, On the Establishment of the Concept of Risk Liability, Northern Jurisprudence, No. 2, 2011.

Chen Jie, Clarifying and Amending the Joint and Several Liability of Auditors in Securities Misrepresentation', Chinese Law Journal 2021, No. 6.

Miao Yinzhi, Dispelling the charm of "from the heavy and strict": Refining the proportional liability of intermediaries requires refined operation", in Economic Observer, 11 June 2021.

Peng Zhenming, On the civil liability of accounting firms for inaccurate financial reports: A review of the case of Shanghai Da Wisdom Company and Cao Jianrong and other securities misrepresentation liability disputes", in Law Review, No. 1, 2020.

Shi Xinyuan, The Application of Proportional Joint and Several Liability in the Determination of Intermediaries' Liability for Misrepresentation", in Journal of Henan University of Economics and Law, No. 4, 2022.

Miao Yinchi, The Elements of Auditor's Liability and the Limitation of Liability in the Compensation for Securities Misrepresentation", in Journal of Financial Law, No. 2, 20221.

Calabresi, Concerning Cause and the Law of Torts: An Essay for Harry Kalven, Jr., 43 U. CII. L. REV. 69, 69 (1975).

Liu Yan, Questioning Some Basic Concepts of “Expert Liability”, in Comparative Law Studies, No. 5, 2005