[Congressional Record Volume 144, Number 147 (Thursday, October 15, 1998)]
[House]
[Pages H11019-H11022]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




CORRECTION TO THE CONGRESSIONAL RECORD OF TUESDAY, OCTOBER 13, 1998, AT 
PAGES H10771-H10776
                                  ____

 CONFERENCE REPORT ON S. 1260, SECURITIES LITIGATION UNIFORM STANDARDS 
                              ACT OF 1998

  Mr. BLILEY. Mr. Speaker, I move to suspend the rules and agree to the 
conference report on the Senate bill (S.

[[Page H11020]]

1260) to amend the Securities Act of 1933 and the Securities Exchange 
Act of 1934 to limit the conduct of securities class actions under 
State law, and for other purposes.
  The Clerk read the title of the Senate bill.
  (For conference report and statement, see Proceedings of the House of 
Friday, October 9, 1998, at page H10266.)
  The SPEAKER pro tempore. Pursuant to the rule, the gentleman from 
Virginia (Mr. Bliley) and the gentleman from Michigan (Mr. Dingell) 
each will control 20 minutes.
  The Chair recognizes the gentleman from Virginia (Mr. Bliley).
  Mr. BLILEY. Mr. Speaker, I yield myself 5 minutes.
  (Mr. BLILEY asked and was given permission to revise and extend his 
remarks and include extraneous material.)
  Mr. BLILEY. Mr. Speaker, I rise in support of the conference report 
on the Senate bill, S. 1260, Securities Litigation Uniform Standards 
Act of 1998. This legislation we are considering today will eliminate 
State court as a venue for meritless securities litigation.
  This legislation has broad bipartisan support. We recognize that the 
trial bar should not make an end run around the work we did in 1995 in 
overriding the President's veto of litigation reform in State court. 
This legislation will protect investors from baseless securities class 
action lawsuits in the capital markets.
  The premise of this legislation is simple: lawsuits alleging 
violations that involve securities that are offered nationally belong 
in Federal court. This premise is consistent with the national nature 
of these markets that we recognize in the National Securities Market 
Improvement Act of 1995.
  The legislative history accompanying the legislation makes clear that 
we are not disturbing the heightened pleading standard established by 
the 1995 Act.
  The economic disruptions around the globe are reflected by the 
volatility that affects our markets. Stock prices are up one day, down 
the next. The prices are not falling due to fraudulent statements, 
which are the purported basis of many strike suits. The fall is due to 
economic conditions.
  If there is intentional fraud, there is nothing in this legislation 
or in the Reform Act to prevent those cases from proceeding. We do not 
need to exacerbate market downturns by allowing companies to be dragged 
into court every time their stock price falls. The 1995 Reform Act 
remedied that problem for Federal courts, and this legislation will 
remedy it for State courts.
  I would like to thank the gentleman from Ohio (Mr. Oxley), the 
chairman of the Subcommittee on Finance and Hazardous Materials, for 
his hard work and leadership. I thank the gentleman from Michigan (Mr. 
John Dingell), the ranking member of the committee, for his 
constructive participation as we move the bill through committee.
  I commend the gentleman from New York (Mr. Tom Manton), the ranking 
member of the subcommittee, not only for his work on this legislation, 
but his valued service on the committee. It has been a pleasure working 
with him, and he will be missed.
  I also commend the gentleman from Washington (Mr. Rick White), the 
original cosponsor of the legislation, for his tireless efforts and 
willingness to compromise that has kept this legislation on track to 
becoming law.
  Likewise, the gentlewoman from California (Ms. Anna Eshoo) has been a 
leading proponent of this legislation, and has worked to ensure its 
passage, and certainly the gentleman from California (Mr. Cox), the 
chairman of the Republican policy committee who has been working on 
this issue for many years.
  Finally, I also commend our colleagues in the other body for their 
work on this important legislation. Mr. Speaker, I urge my colleagues 
to join me and support S. 1260.
  Mr. Speaker, I ask unanimous consent to include for the Record a 
complete copy of the conference report on S. 1260.
  When the conference report was filed in the House, a page from the 
statement of managers was inadvertently omitted. That page was included 
in the copy filed in the Senate, reflecting the agreement of the 
managers. We are considering today the entire report and statement of 
managers as agreed to by conferees and inserted in the Record.
  The SPEAKER pro tempore. Since the Chair is aware that the papers 
filed in the Senate contain that matter as part of the joint statement, 
its omission from the joint statement filed in the House can be 
corrected by a unanimous consent request.
  Is there objection to the request of the gentleman from Virginia?
  There was no objection.
  * * *
  The text of the Joint Statement of managers on S. 1260 is as follows:

       Joint Explanatory Statement of the Committee of Conference

       The managers on the part of the House and the Senate at the 
     conference on the disagreeing votes of the two Houses on the 
     amendment of the House to the bill (S. 1260) to amend the 
     Securities Act of 1933 and the Securities Exchange Act of 
     1934 to limit the conduct of securities class actions under 
     State law, and for other purposes, submit the following joint 
     statement to the House and the Senate in explanation of the 
     effect of the action agreed upon by the managers and 
     recommended in the accompanying conference report:

        The Securities Litigation Uniform Standards Act of 1998


                           Uniform Standards

       Title 1 of S. 1260, the Securities Litigation Uniform 
     Standards Act of 1998, makes Federal court the exclusive 
     venue for most securities class action lawsuits. The purpose 
     of this title is to prevent plaintiffs from seeking to evade 
     the protections that Federal law provides against abusive 
     litigation by filing suit in State, rather than in Federal, 
     court. The legislation is designed to protect the interests 
     of shareholders and employees of public companies that are 
     the target of meritless ``strike'' suits. The purpose of 
     these strike suits is to extract a sizeable settlement from 
     companies that are forced to settle, regardless of the lack 
     of merits of the suit, simply to avoid the potentially 
     bankrupting expense of litigating.
       Additionally, consistent with the determination that 
     Congress made in the National Securities Markets Improvement 
     Act \1\ (NSMIA), this legislation establishes uniform 
     national rules for securities class action litigation 
     involving our national capital markets. Under the 
     legislation, class actions relating to a ``covered security'' 
     (as defined by section 18(b) of the Securities Act of 1933, 
     which was added to that Act by NSMIA) alleging fraud or 
     manipulation must be maintained pursuant to the provisions of 
     Federal securities law, in Federal court (subject to certain 
     exceptions).
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     \1\ Public law 104-290 (October 11, 1996).
---------------------------------------------------------------------------
       ``Class actions'' that the legislation bars from State 
     court include actions brought on behalf of more than 50 
     persons, actions brought on behalf of one or more unnamed 
     parties, and so-called ``mass actions,'' in which a group of 
     lawsuits filed in the same court are joined or otherwise 
     proceed as a single action.
       The legislation provides for certain exceptions for 
     specific types of actions. The legislation preserves State 
     jurisdiction over: (1) certain actions that are based upon 
     the law of the State in which the issuer of the security in 
     question is incorporated \2\; (2) actions brought by States 
     and political subdivisions, and State pension plans, so long 
     as the plaintiffs are named and have authorized participation 
     in the action; and (3) actions by a party to a contractual 
     agreement (such as an indenture trustee) seeking to enforce 
     provisions of the indenture.
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     \2\ It is the intention of the managers that the suits under 
     this exception be limited to the state in which issuer of the 
     security is incorporated, in the case of a corporation, or 
     state of organization, in the case of any other entity.
---------------------------------------------------------------------------
       Additionally, the legislation provides for an exception 
     from the definition of ``class action'' for certain 
     shareholder derivative actions.
       Title II of the legislation reauthorizes the Securities and 
     Exchange Commission (SEC or Commission) for Fiscal Year 1999. 
     This title also includes authority for the SEC to pay 
     economists above the general services scale.
       Title III of the legislation provides for corrections to 
     certain clerical and technical errors in the Federal 
     securities laws arising from changes made by the Private 
     Securities Litigation Reform Act of 1995 \3\ (the ``Reform 
     Act'') and NSMIA.
---------------------------------------------------------------------------
     \3\ Public Law 104-67 (December 22, 1995).
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       The managers note that a report and statistical analysis of 
     securities class actions lawsuits authored by Joseph A. 
     Grundfest and Michael A. Perino reached the following 
     conclusion:

       The evidence presented in this report suggests that the 
     level of class action securities fraud litigation has 
     declined by about a third in federal courts, but that there 
     has been an almost equal increase in the level of state court 
     activity, largely as a result of a ``substition effect'' 
     whereby plaintiffs resort to state court to avoid the new, 
     more stringent requirements of federal cases. There has also 
     been an increase in parallel litigation between state and 
     federal courts in an apparent effort to avoid the federal 
     discovery stay or other provisions of the Act. This increase 
     in state activity has the potential not only

[[Page H11021]]

     to undermine the intent of the Act, but to increase the 
     overall cost of litigation to the extent that the Act 
     encourages the filing of parallel claims.\4\
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     \4\ Grundfest, Joseph A. & Perino, Michael A., Securities 
     Litigation Reform: The First Year's Experience: A Statistical 
     and Legal Analysis of Class Action Securities Fraud 
     Litigation under the Private Securities Litigation Reform Act 
     of 1995, Stanford Law School (February 27, 1997).
---------------------------------------------------------------------------
       Prior to the passage of the Reform Act, there was 
     essentially no significant securities class action litigation 
     brought in State court.\5\ In its Report to the President and 
     the Congress on the First Year of Practice Under the Private 
     Securities Litigation Reform Act of 1995, the SEC called the 
     shift of securities fraud cases from Federal to State court 
     ``potentially the most significant development in securities 
     litigation'' since passage of the Reform Act.\6\
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     \5\ Id. n. 18.
     \6\ Report to the President and the Congress on the First 
     Year of Practice Under the Private Securities Litigation 
     Reform Act of 1995, U.S. Securities and Exchange Commission, 
     Office of the General Counsel, April 1997 at 61.
---------------------------------------------------------------------------
       The managers also determined that, since passage of the 
     Reform Act, plaintiffs' lawyers have sought to circumvent the 
     Act's provisions by exploiting differences between Federal 
     and State laws by filing frivolous and speculative lawsuits 
     in State court, where essentially none of the Reform Act's 
     procedural or substantive protections against abusive suits 
     are available.\7\ In California, State securities class 
     action filings in the first six months of 1996 went up 
     roughly five-fold compared to the first six months of 1995, 
     prior to passage of the Reform Act.\8\ Furthermore, as a 
     state securities commissioner has observed:
---------------------------------------------------------------------------
     \7\ Testimony of Mr. Jack G. Levin before the Subcommittee on 
     Finance and Hazardous Materials of the Committee on Commerce, 
     House of Representatives, Serial No. 105-85, at 41-45 (May 
     19, 1998).
     \8\ Id. at 4.
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       It is important to note that companies can not control 
     where their securities are traded after an initial public 
     offering. * * * As a result, companies with publicly-traded 
     securities can not choose to avoid jurisdictions which 
     present unreasonable litigation costs. Thus, a single state 
     can impose the risks and costs of its pecular litigation 
     system on all national issuers.\9\
---------------------------------------------------------------------------
     \9\ Written statement of Hon. Keith Paul Bishop, 
     Commissioner, California Department of Corporations, 
     submitted to the Senate Committee on Banking, Housing and 
     Urban Affairs' Subcommittee on Securities'' ``Oversight 
     Hearing on the Private Securities Litigation Reform Act of 
     1995,'' Serial No. 105-182, at 3 (July 27, 1998).
---------------------------------------------------------------------------
       The solution to this problem is to make Federal court the 
     exclusive venue for most securities fraud class action 
     litigation involving nationally traded securities.


                                Scienter

       It is the clear understanding of the managers that Congress 
     did not, in adopting the Reform Act, intend to alter the 
     standards of liability under the Exchange Act.
       The managers understand, however, that certain Federal 
     district courts have interpreted the Reform Act as having 
     altered the scienter requirement. In that regard, the 
     managers again emphasize that the clear intent in 1995 and 
     our continuing intent in this legislation is that neither the 
     Reform Act nor S. 1260 in any way alters the scienter 
     standard in Federal securities fraud suits.
       Additionally, it was the intent of Congress, as was 
     expressly stated during the legislative debate on the Reform 
     Act, and particularly during the debate on overriding the 
     President's veto, that the Reform Act establish a heightened 
     uniform Federal standard on pleading requirements based upon 
     the pleading standard applied by the Second Circuit Court of 
     Appeals. Indeed, the express language of the Reform Act 
     itself carefully provides that plaintiffs must ``state with 
     particularity facts giving rise to a strong inference that 
     the defendant acted with the required state of mind.'' The 
     Managers emphasize that neither the Reform Act nor S. 1260 
     makes any attempt to define that state of mind.
       The managers note that in Ernst and Ernst v. Hochfelder 
     \10\, the Supreme Court left open the question of whether 
     conduct that was not intentional was sufficient for liability 
     under the Federal securities laws. The Supreme Court has 
     never answered that question. The Court expressly reserved 
     the question of whether reckless behavior is sufficient for 
     civil liability under section 10(b) and Rule 10b-5 in a 
     subsequent case, Herman & Maclean v. Huddleston \11\, where 
     it stated, ``We have explicitly left open the question of 
     whether recklessness satisfies the scienter requirement.''
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     \10\ 425 U.S. 185 (1976).
     \11\ 459 U.S. 375 (1983).
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       The managers note that since the passage of the Reform Act, 
     a data base containing many of the complaints, responses and 
     judicial decisions on securities class actions since 
     enactment of the Reform Act has been established on the 
     Internet. This data base, the Securities Class Action 
     Clearinghouse, is an extremely useful source of information 
     on securities class actions. It can be accessed on the world 
     wide web at http://securities.stanford.edu. The managers urge 
     other Federal courts to adopt rules, similar to those in 
     effect in the Northern District of California, to facilitate 
     maintenance of this and similar data bases.
     Tom Bliley,
     M.G. Oxley,
     Billy Tauzin,
     Chris Cox,
     Rick White,
     Anna G. Eshoo,

                                Managers on the Part of the House.

     Alfonse D'Amato,
     Phil Gramm,
     Chris Dodd,
                               Managers on the Part of the Senate.

  Mr. BLILEY. Mr. Speaker, In 1995, during the consideration of the 
Private Securities Litigation Reform Act and the override of the 
President's veto of that Act, Congress noted that in Ernst and Ernst v. 
Hochfelder,\1\ the Supreme court expressly left open the question of 
whether conduct that was not intentional was sufficient for liability 
under section 10(b) of the Securities Exchange Act of 1934. The Supreme 
Court has never answered that question. The Court specifically reserved 
the question of whether reckless behavior is sufficient for civil 
liability under section 10(b) and Rule 105-5 \2\ in a subsequent case, 
Herman & Maclean v. Huddleston,\3\ where it stated, ``We have 
explicitly left open the question of whether recklessness satisfies the 
scienter requirement.''
  The Reform Act did not alter statutory standards of liability under 
the securities laws (except in the safe harbor for forward-looking 
statements). As Chairman of the Conference Committee that considered 
the Reform Act and as the bill's author, respectively, it is our view 
that non-intentional conduct can never be sufficient for liability 
under section 10(b) of the Exchange Act. We believe that the structure 
and history of the securities laws indicates no basis for liability 
under this section for non-intentional conduct. The following is a 
discussion of the legal reasons supporting our view that non-
intentional conduct is insufficient for liability under section 10(b) 
of the Exchange Act.\4\
  In Ernst & Ernst v. Hochfelder, the Supreme Court held that scienter 
is a necessary element of an action for damages under Section 10(b) and 
Rule 10b-5. The Supreme Court defined scienter as ``a mental state 
embracing intent to deceive, manipulate, or defraud.'' Hochfelder, 425 
U.S. at 194 n. 12.


   a. neither the text nor the legislative history of section 10(b) 
                support liability for reckless behavior

  ``The starting point in every case involving construction of a 
statute is the language itself.'' \5\ Because Congress ``did not create 
a private Sec. 10(b) cause of action and had no occasion to provide 
guidance about the elements of a private liability scheme,'' the 
Supreme Court has been forced ``to infer how the 1934 Congress would 
have addressed the issue[s] had the 10b-5 action been included as an 
express provision in the 1934 Act.'' \6\
---------------------------------------------------------------------------
     Footnotes at end.
---------------------------------------------------------------------------
  The inference from the language of the statute is clear: Congress 
would not have created Section 10(b) liability for reckless behavior. 
Section 10(b) prohibits ``any manipulative or deceptive device or 
contrivance'' in contravention of rules adopted by the Commission 
pursuant to Section 10(b)'s delegated authority. The terms 
``manipulative,'' ``device,'' and ``contrivance'' ``make unmistakable a 
congressional intent to proscribe a type of conduct quite different 
from negligence.'' Hochfelder, 425 U.S. at 199. The intent was to 
``proscribe knowing or intentional misconduct.'' Id. (emphasis 
supplied). In addition, the use of the word manipulative is 
``especially significant'' because ``[i]t is and was virtually a term 
of art when used in connection with securities markets. It connotes 
intentional or willful conduct designed to deceive or defraud investors 
by controlling or artificially affecting the price of securities.'' Id. 
(footnote omitted).
  Section 10(b) of the Exchange Act cannot be violated through 
inadvertence or with lack of subjective consciousness. Nor can one 
construct a device or contrivance without willing to do so. The words 
``manipulate,'' ``device,'' or ``contrivance,'' by their very nature, 
require conscious intent and connote purposive activity.\7\ The mental 
state consistent with the statute can be achieved only if a defendant 
acts with a state of mind ``embracing''--an active verb--``intent''--
requiring a conscious state of mind--``to deceive, manipulate or 
defraud.'' \8\
  The legislative history compels the same conclusion. ``[T]here is no 
indication that Sec. 10(b) was intended to proscribe conduct not 
involving scienter.'' Hochfelder, 425 U.S. at 202; see also Aaron v. 
SEC, 446 U.S. 680, 691 (1980) (same). Indeed, ``[i]n considering 
specific manipulative practices left to Commission regulation *  * * 
the [Congressional] reports indicate that liability would not attach 
absent scienter, supporting the conclusion that Congress intended no 
lesser standard under Sec. 10(b). ``Hochfelder, 425 U.S. at 204. 
Congress thus ``evidenced a purpose to proscribe only knowing and 
intentional misconduct.'' Aaron, 446 U.S. at 690 (emphasis supplied).


   B. The Structure of the Statute Underscores That There can be No 
                Section 10(b) Liability for Recklessness

  In drafting the federal securities laws, Congress knew how to use 
specific language to

[[Page H11022]]

impose liability for reckless or negligent behavior and how to create 
strict liability for violations of the federal securities laws.\8\ But 
Congress did not use such language to impose Section 10(b) liability on 
reckless behavior. Therefore, just as there is no liability for aiding 
and abetting a violation of Section 10(b) because Congress knew how to 
create such liability but did not,\10\ and just as there is no 
liability under Section 12(l) of the Securities Act, 17 U.S.C. 
Sec. 771(l), for participants who are merely collateral to an offer or 
sale because Congress knew how to create such liability but did 
not,\11\ and just as there is no remedy under Section 10(b) for those 
who neither purchase nor sell securities because Congress knew how to 
create such a remedy but did not,\12\ there can be no liability for 
reckless conduct under Section 10(b) because Congress clearly knew how 
to impose liability for reckless behavior but did not.
  The Supreme Court has, moreover, emphasized that the securities laws 
``should not be read as a series of unrelated and isolated 
provisions.'' \13\ The federal securities laws are to be interpreted 
consistently and as part of an interrelated whole.'' \14\ In Virginia 
Bankshares, Inc. v. Sandberg, 501 U.S. 1083 (1991), the Court reserved 
``the question whether scienter was necessary for liability under 
Sec. 14(a).'' \15\ The Court nonetheless held that statements of 
``reasons, opinions or belief'' are actionable under Sec. 14(a), 15 
U.S.C. 78n(a), and Rule 14a-9, 17 C.F.R. Sec. 240.14a-9, as false or 
misleading only if there is proof of (1) subjective ``disbelief or 
undisclosed motivation,'' and (2) objective falsity. 501 U.S. at 1095-
96. Justice Scalia explained the Court's holding as follows:
  As I understand the Court's opinion, the statement ``In the opinion 
of the Directors, this is a high value for the shares'' would produce 
liability if in fact it was not a high value and the Directors knew 
that. It would not produce liability if in fact it was not a high value 
but the Directors honestly believed otherwise. The statement ``The 
Directors voted to accept the proposal because they believe it offers a 
high value'' would not produce liability if in fact the Directors' 
genuine motive was quite different--except that it would produce 
liability if the proposal in fact did not offer a high value and the 
Directors knew that.\16\
  It follows that, if: (A) a statement must be subjectively disbelieved 
in order to be actionable under Section 14(a), a provision that may or 
may not required scienter, then: (B) a fortiori, under Section 10(b), a 
provision that clearly requires scienter, plaintiffs must show 
subjective awareness of a scheme or device.
  Any other result would lead to the anomalous conclusion that 
statements actionable under Section 10(b), the more restrictive 
``catchall'' provision of the federal securities laws, Hochfelder, 425 
U.S. at 203, would not be actionable under Section 14(a). Indeed, 
``[t]here is no indication that Congress intended anyone to be made 
liable [under Sec. 10(b)] unless he acted other than in good faith 
[and] [t]he catchall provision of Sec. 10(b) should be interpreted no 
more broadly.'' Id. at 206 \17\
  The language of the text, the legislative history, and the structure 
of the statute therefore each compel the conclusion that intentional 
conduct is a prerequisite for liability under Section 10(b).
  Additionally, the Reform Act established a heightened pleading 
standard for private securities fraud lawsuits. The Conference Report 
accompanying the Reform Act stated in relevant part:
  The Conference Committee language is based in part on the pleading 
standard of the Second Circuit. The standard also is specifically 
written to conform the language to rule 9(b)'s notion of pleading with 
``particularity.''
  Regarded as the most stringent pleading standard, the Second Circuit 
requirement is that the plaintiff state facts with particularity, and 
that these facts intern must give rise a strong inference of the 
defendant's fraudulent intent. Because the Conference Committee intends 
to strengthen existing pleading requirements, it does not intend to 
codify the Second Circuit's case law interpreting this pleading 
standard. Footnote: For this reason, the conference Report chose not to 
include in the pleading standard certain language relating to motive, 
opportunity, or recklessness.\18\
  The Conference Report accompanying S. 1260 is consistent with that 
heightened pleading standard articulated in 1995.


                               footnotes

     \1\ 425 U.S. 185 (1976).
     \2\ 17 C.F.R. Sec. 240.10b-5.
     \3\ 459 U.S. 375 (1983).
     \4\ We are grateful to Professor Joe Grundfest and Ms. Susan 
     French of Stanford University for guidance to us on these 
     questions.
     \5\ Hochfelder, 425 U.S. at 197 (quoting Blue Chip Stamps v. 
     Manor Drug Stores, 421 U.S. 723, 756 (1975) (Powell, J., 
     concurring). See also Gustafson v. Alloyd Co., 115 S. Ct. 
     1061, 1074 (1995) (Thomas, J., Dissenting). Central Bank, 114 
     S. Ct. at 1446; Landreth Timber Co. v. Landreth, 471 U.S. 
     681, 685 (1985); Santa Fe Indus., Inc. v. Green, 430 U.S. 
     462, 472 (1977).
     \6\ Central Bank, 114 S. Ct. at 1441-42 (quoting Musick, 
     Peeler 113 S. Ct. at 2089-90).
     \7\ See Hochfelder, 425 U.S. at 199 n. 20 (``device'' means 
     `` `that which is devised, or formed by design; a 
     contrivance; an invention; project; scheme; often a scheme to 
     deceive; a strategem; an artifice' '') (quoting Webster's 
     International Dictionary (2d ed. 1934)); id (defining 
     ``contrivance'' as `` `[a] thing contrived or used in 
     contrivance; a scheme . . . .'').
     \8\ Hochfelder, 425 U.S. at 193 n. 12. Cf. Santa Fe 
     Industries, 430 U.S. at 478; Schreiber v. Burlington Northern 
     Inc., 472 U.S. 1, 5-8 (1985).
     \9\ Section 11 of the Securities Act of 1933, 15 U.S.C. 
     Sec. 77k. for example, imposes strict liability on the issuer 
     for material misstatements or omissions in a registration 
     statement and a ``sliding scale'' negligence standard on 
     other participants in the offering process. See Hochfelder, 
     425 U.S. at 208. Sections 17 (a)(2) and (3) of the Securities 
     Act, 15 U.S.C. Sec. 77q(a) (2),(3), impose liability for 
     negligent or reckless conduct in the sale of securities. 
     Aaron, 446 U.S. at 697.
     \10\ Central Bank, 114 S. Ct. at 1448 (``Congress knew how to 
     impose aiding and abetting liability when it chose to do 
     so.'') (citing statutes).
     \11\ Pinter v. Dahl,486 U.S. 622, 650 & n.26 (1988) (Congress 
     knew how to provide liability for collateral participants in 
     securities offerings when it chose to do so).
     \12\ Blue Chip, 421 U.S. at 734 (``When Congress wished to 
     provide a remedy for those who neither purchase nor sell 
     securities, it has little trouble doing so expressly.'').
     \13\ Gustafson v. Alloyd Co., 115 S. Ct. 1061, 1067 (1995).
     \14\ See, e.g, Hochfelder, 425 U.S. at 206 (citing Blue Chip, 
     421 U.S. at 727-30; SEC v. National Sec., Inc., 393 U.S. 453, 
     466 (1969)).
     \15\ 501 U.S. at 1090 n. 5 (citing TSC Indus. Inc. v. 
     Northway, Inc., 426 U.S. 438, 444 n. 7 (1976) (reserving the 
     same question).
     \16\ 501 U.S. at 1108-09 (Scalia, J., concurring in part and 
     concurring in the judgment).
     \17\ The Supreme Court has previously extended holdings from 
     Sec. 14(a)'s proxy antifraud provisions to Sec. 10(b)'s 
     general antifraud provision. See, e.g., Basic, Inc. v. 
     Levinson, 485 U.S. 224, 231-32 (1988) (adopting for purposes 
     of Sec. 10(b) liability the standard for materiality 
     initially defined under Sec. 14(a) by TSC, 426 U.S. at 445).
     \18\ Conference Report accompanying the Private Securities 
     Litigation Reform Act of 1995, p. 41, 48.

                          ____________________