Supreme Court Takes a Decision on Investment Banks

The high court stated that antitrust suits may be of a "substantial risk" to the securities market.

"In some ways it's sort of restating the standards announced 25 to 30 years ago," said Wesley Powell, an antitrust lawyer with Hunton & Williams in New York. "The fact that these antitrust cases have been thrown out on these grounds I think will send a high profile message to would-be plaintiffs who were thinking of bringing antitrust claims in the securities context."

Many lawyers for investment banks say the difference between legal and illegal activity is a highly technical matter that must be left to highly trained securities regulators to decide, rather than to courtroom juries. Voting 7-1, the Supreme Court stated that antitrust courts were likely to make serious mistakes.

James Cox, a professor of corporate and securities law at Duke University in Durham, North Carolina, said that the antitrust suits ``would have opened up a real hornet's nest. The practices that were being challenged were a variety of practices that the underwriters customarily follow.''

The high court said an antitrust shield was warranted because the Securities and Exchange Commission regulates IPOs and lays out detailed rules governing what steps underwriters can and can't take. Writing for the court, Justice Stephen Breyer said antitrust suits created ``a substantial risk of injury to the securities markets.''

``Had the court taken the opposite view, the industry would have faced massive legal exposure and a major engine of American growth would have been unnecessarily damaged,'' said Marc Lackritz, chief executive officer of the Securities Industry and Financial Markets Association.

Wall Street banks representatives met the court's decision enthusiastically.

"If this case had gone the other way, the resulting uncertainty and increased risk would have had negative and wide-ranging consequences for underwriters and issuers, increasing costs to investors and roiling the capital markets, to the detriment of the whole economy," said Travis Larson, a spokesman for the Securities Industry and Financial Markets Association.

Christopher Lovell, the lead lawyer for the investors at the high court, said that the ruling underscores the importance of separate cases that investors are seeking to press against the banks under federal securities laws. He added that the court decision is saying that the premise is that the securities laws will redress this and that the focus is put on the securities cases.

The 17 companies named in the lawsuit before the court included Credit Suisse Securities (USA) LLC,; Bear, Stearns & Co.; Citigroup Global Markets Inc.; Goldman, Sachs & Co.; and Morgan Stanley & Co.. - Alla Harutyunyan for HULIQ.COM