Today’s WSJ notes that securities cases are temporarily down in this stable-to-up market, but attributes many of the suits that have been filed to stricter financial reporting, and warns:
Just wait for the next economic downturn, when class-action lawyers will be able to exploit Sarbox's new "internal controls" documentation as a roadmap.
Precisely. As I said in my paper, Sarbanes-Oxley after Three Years,
The main problems with the internal controls reports . . . may persist even after firms have established reporting procedures and infrastructures. Most importantly, SOX imposes significant new liability risks, since a clever trial lawyer might be able to trace virtually any business problem, in hindsight, to a failure to implement some internal control.
See full Article.
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