Legal

The accounting firm in this case is not liable under the law . It is quite clear that section 10 (b ) does not apply to those firms solely engaged in providing an independent audit of a firm 's financial statements . In for Touche Ross to be liable the firm would have to receive a financial stake in one of the business entities involved in the scam and knowingly , willingly distort the numbers so as to encourage investment . Such an interest would by the established bright line test make the accountants liable for damages . In

this instance the accountants did no such thing they took the extraordinary step of blatantly telling the customer in so many words that the data upon which they were basing their investment decision was garbage . This alone established their innocence as would become very clear after the establishment of a bright line test . The need for a bright line test is evident . The ambiguity of section 10 (b ) makes it possible to hold a firm liable for harm caused by information in its possession if that information could substantially alter the outcome of a financial transaction if released by the accounting firm . The court and the law needed to be able to clearly and consistently decide whether and when a firm should disclose information to a client . This was done by establishing a list of words that by definition whenever they appear in a document these words amount to a call for action by the author...