U.S. Chamber says proposed accounting rule change could spur lawsuit abuse
WASHINGTON (Legal Newsline)-Proposed accounting rule changes could result in widespread lawsuit abuse, the U.S. Chamber of Commerce said Friday.
Additionally, the proposed rules would not help investors, said David Hirschman, president of the U.S. Chamber Center for Capital Markets Competitiveness.
The rule change would "significantly increase" the amount of information that publicly traded companies are required to disclose regarding pending or threatened litigation, the Chamber said.
"This proposed rule is nothing but a solution in search of a problem," Hirschman said. "The changes would invite excessive and abusive lawsuits against public companies and hurt U.S. global competitiveness."
In a letter to Robert Herz, chairman of the Financial Accounting Standards Board, Chamber executives outlined their objections to proposed amendments to Statement of Financial Accounting Standard No. 5, the "Accounting for Contingencies" rule.
"The proposal would encourage the same abusive litigation that is threatening the integrity and efficiency of our legal system. The litigious nature of the U.S. markets have put us at a competitive disadvantage vis-à-vis other markets," the letter said.
It added that reports indicate that "excessive litigation generally or securities class actions specifically as a significant
threat to the competitiveness of our capital markets."
Companies are currently required to disclose loss contingencies for "probable losses." The proposed rule would require companies to disclose all contingencies regardless of how remote the losses might be.
The additional requirements would obligate businesses to release confidential information, "likely resulting in excessive or harassing lawsuits" filed by trial attorneys, the Chamber said.
"If there's one thing we don't need more of, it's abusive lawsuits," said Lisa Rickard, president of the U.S. Chamber Institute for Legal Reform.
"Adopting these proposals would add uncertainty, complexity, new liability, and a great deal of cost while compelling companies to provide potentially unreliable, immaterial, and privileged information about pending litigation."
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