Paul Sarbanes

Mr. SARBANES

Mr. SARBANES. I do not think it is unfair. But I do want to make this point. The question is, who is going to go scot-free? For years, we caught aiders and abettors on recklessness and knowingly, on both of those standards. That was the law.

Mr. SARBANES. What I am trying to point out to my colleague is that there is a joint and several liability problem in this bill. We have tried to deal with that--unsuccessfully. There was a statute of limitations problem in this bill. I think these are large problems. These are what the independent objective groups have been writing to us about. Now we are addressing the aider and abettor problem. The way you have written the bill, aiders and abettors in a private action go scot- free--whatever the test is. They go scot-free on recklessness and on knowingly. The way you have written the bill --

Mr. SARBANES. I am trying to get over that. I am trying to point out that there are a lot of other problems with this bill.

Mr. SARBANES. You are not even reaching the aider and abettor; you only go to recklessness.

Mr. SARBANES. How can you justify that?

Mr. SARBANES. By your own admission, under this bill, an aider and abettor cannot be reached in a private action suit, is that correct?

Mr. SARBANES. Will the Senator repeat that again?

Mr. SARBANES. The aiding-and-abetting issue is separate from the joint-and-several issue, is it not?

Mr. SARBANES. The bill does not have a knowing standard in it; is that correct? The bill leaves out aider and abettor altogether in a private action.

Mr. SARBANES. My own view is, if you are reckless, you ought to be able to be reached as an aider or abettor. I understand the Senator is opposed to that. The Senator's bill, as I understand it, would not allow a knowing aider and abettor to be reached by a private securities suit; is that correct?

Mr. SARBANES. Mr. President, I make the point of order that the Senate is not in order, and I request the Chair to obtain order in the Senate before we go to the explanation of the amendment and the response thereto, out of courtesy to our colleagues.

Mr. SARBANES. Mr. President, as I understand it, under the unanimous consent request, the Senator from California now has the opportunity to address the substance of her amendment for 1 minute and the Senator from New York has 1 minute to reply; is that correct?

Mr. SARBANES. That in an instance of proportionate liability----

Mr. SARBANES. Mr. President, I will be very quick. This amendment takes a provision that is in the bill that departs from proportionate liability. The bill says that in a situation in which you have a small investor, with a net worth of less than $200,000, and if that small investor loses over 10 percent of his net worth--in other words, $20,000--then you will in effect hold them harmless, all the defendants will continue to be jointly and severally liable. I leave the $200,000 net worth provision but eliminate the 10 percent requirement as to the amount of loss, so if someone has a net worth of $200,000 and loses $5,000, they still would be protected. The notion of this is to try to protect small investors, and I am very frank to tell you I think they ought to be protected. Under the other provision in the bill, they provide--

Mr. SARBANES. I know, but you are----

Mr. SARBANES. I ask the Senator from Connecticut, what is the net worth of the median investor?

Mr. SARBANES. Will the Senator yield on that very point?

Mr. SARBANES. And then the subsequent two votes will be 10-minute votes.

Mr. SARBANES. Mr. President, I think maybe we can work this out if we begin the vote at 5:45, and divide the time between now and then equally and make the two votes after the first vote 10-minute votes.

Mr. SARBANES. The time between now and 5:45 will be divided equally?

Mr. SARBANES. The subsequent two votes would be 10 minutes each; is that correct?

Mr. SARBANES. When will the first vote occur under this request?

Mr. SARBANES. For the private party to recover the damages, the private party must bring this suit. So your private party would be left, in effect, holding the bag.

Mr. SARBANES. If the Senator will yield on that point, the SEC can bring action against the bad actor to punish the bad actor, but that action would not recover the damages for the innocent investor. I ask the Senator from Nevada, is that not correct?

Mr. SARBANES

Mr. SARBANES. I have no objection. In other words, we are leaving the Boxer amendment open to a second-degree amendment, is that right?