Supreme Court Gives Investors the Shaft

The highest court in the land today gave a hardy "drop dead" to investors, tossing out lawsuits against the major Wall Street banks for pumping up tech stocks in the 1990s. Here's an AP dispatch on the bad news, and here's the opinion.

Investors had sued the banks under the antitrust laws. Justice Stephen Breyer said that the suits raise "a substantial risk of injury to the securities market." In a ruling filled with rationalizations and mumbo-jumbo, Breyer cited "a serious conflict" between applying antitrust law to the case and proper enforcement of the securities law.

Now that's interesting. Don't you think that the actions of the banks is what causes "substantial risk of injury to the securities market" -- not suits seeking restitution for fraudulent conduct by those banks?

It gets better. Breyer ruled:

We believe it fair to conclude that, where conduct at the core of the marketing of new securities is at issue; where securities regulators proceed with great care to distinguish the encouraged and permissible from the forbidden; where the threat of antitrust lawsuits, through error anddisincentive, could seriously alter underwriter conduct in undesirable ways, to allow an antitrust lawsuit would threaten serious harm to the efficient functioning of thesecurities markets.

If you wonder how Breyer wandered into the la-la land described above, note what he says in the next paragraph: "the SEC actively enforces the rules and regulations that forbid the conduct in question." Yeah, right.

© 2007 Gary Weiss. All rights reserved.

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