Circuit Split or a Matter of Semantics? The Supreme Court\u27s Upcoming Decision on Rule 10b-5 Scheme Liability and Its Implications for Tax Shelter Fraud Litigation

After Internal Revenue Service investigations exposed widespread fraud among tax shelter promoters, angry investors sued for securities fraud under Securities and Exchange Commission Rule 10b-5, which provides a cause of action against “primary violators” of the Rule but not against mere “aiders and abettors.” This controversial distinction is further complicated by the recent introduction of “scheme liability” lawsuits under two previously obscure provisions of Rule 10b-5. This Note examines the circuit split over the “primary violator”/“aider and abettor” distinction in scheme liability claims, arguing that the circuits\u27 conflicting concepts of scheme liability actually cover similar conduct, and that tax shelter promoters likely will be considered primary violators under either concept

Financial Information Failure and Lawyer Responsibility

When public firms collapse amid allegations of financial information failure-such as misleading financial statements-society looks beyond the role of accountants to see who else should be held responsible. Lawyers advising the firm increasingly are charged with responsibility, perhaps because modern financial and business complexities, as well as rules that make accounting determinations turn in part on legal conclusions, have blurred the boundary between legal and accounting duties. Lawyers should want to satisfy this responsibility not only to avoid liability but also to safeguard their reputation and integrity. The difficult question, which this article attempts to answer, is what that responsibility should be

Auditor Independence-Its Importance to the External Auditor's Role in Banking Regulation and Supervision

The role of the external auditor in the supervisory process requires standards such as independence,objectivity and integrity to be achieved. Even though the regulator and external auditor perform similar functions, namely the verification of financial statements, they serve particular interests. The regulator works towards safeguarding financial stability and investor interests. On the other hand, the external auditor serves the private interests of the shareholders of a company. The financial audit remains an important aspect of corporate governance that makes management accountable to shareholders for its stewardship of a company2. The external auditor may however, have a commercial interest too. The debate surrounding the role of external auditors focusses in particular on auditor independence. A survey by the magazine “Financial Director” shows that the fees derived from audit clients in terms of non-audit services are significant in comparison with fees generated through auditing.3 Accounting firms sometimes engage in a practice called “low balling” whereby they set audit fees at less than the market rate and make up for the deficit by providing non audit services. As a result, some audit firms have commercial interests to protect too. There is concern that the auditor's interests to protect shareholders of a company and his commercial interests do not conflict with each other. Sufficient measures need to be in place to ensure that the external auditor's independence is not affected. Brussels proposed a new directive for auditors to try to prevent further scandals such as those of Enron and Parmalat.4 The new directive states that all firms listed on the stock market must have independent audit committees which will recommend an auditor for shareholder approval.5 It also states that auditors or audit partners must be rotated but does not mention the separation of auditors from consultancy work despite protests that there is a link to compromising the independence of auditors.6 However this may be because Brussels also shares the view that there is no evidence confirming correlation between levels of non-audit fees and audit failures and that as a result, sufficient safeguards are in place.7 This paper aims to consider the importance of auditor independence in the external auditor's role in banking regulation and supervision. In doing so, it also considers factors which may threaten independence and efforts which have been introduced to act as safeguards to the auditor's independence. It will also support the claim that auditor independence is indeed central to the auditor's role in banking regulation and supervision

A National Tax Bar: An End to the Attorney-Accountant Tax Turf War

Although current case law is divided regarding when an accountant is practicing law, this Article will explore different approaches to this problem. Specifically, Part II of this Article explores which entities control the regulation of the legal profession. Next, Part III examines the impact of the state courts on the issue of unauthorized legal practice. Part IV touches on the related issue of privilege and the treatment of attorney-client privilege in the context of tax practice. Further, Part V considers whether tax practice should be considered the practice of law, and Part VI of this Article examines the legal profession\u27s obligation to regulate the practice of law. Finally, Part VII proposes new educational requirements and the establishment of a tax bar to assure the public of some minimum standard of education and competency in the area of taxation

The Limits of Lawyering: Legal Opinions in Structured Finance

Significant controversy surrounds the issuance of legal opinions in structured finance transactions, particularly where accountants separately use these opinions, beyond their traditional primary use, for determining whether to characterize the transactions as debt. Reflecting at its core the unresolved boundaries between public and private in financial transactions, this controversy raises important issues of first impression: To what extent, for example, should lawyers be able to issue legal opinions that create negative externalities? Furthermore, what should differentiate the roles of lawyers and accountants in disclosing information to investors? Resolution of these issues not only helps to demystify the mystique, and untangle the morass, of legal-opinion giving but also affects the very viability of the securitization industry, which dominates American, and increasingly global, financing