Chamber of Commerce asks court to reverse securities decision

A recent decision by a three-judge panel of the federal appeals court in Boston “dramatically expands securities fraud liability” and should be reversed, the U.S. Chamber of Commerce said in an amicus brief filed April 22. The Chamber, based in Washington, urged the 1st U.S. Circuit Court of Appeals to reject the ruling handed up in December by a three-judge panel in Securities and Exchange Commission v. James Tambone and Robert Hussey and rehear the case. Mr. Tambone and Mr. Hussey are former executives of Columbia Funds Distributor Inc. of Portland, Ore., the underwriter and distributor for about 140 mutual funds in the Columbia Funds complex. They were charged with fraud by the SEC in 2005 for participating in a scheme to allow preferred customers to engage in frequent short-term trading, despite fund disclosures claiming such trades were not permitted. “The court expanded the authority of both the SEC and private plaintiffs to hold officers liable for merely relying on statements made by those they supervise,” said Robin Conrad, executive vice president of the National Chamber Litigation Center, the Chamber of Commerce’s public policy law firm. Ms. Conrad made the statement in a release. The December decision “effectively rewrites the securities laws to allow a new ‘aiding and abetting’ cause of action,” Ms. Conrad said in the release.