TJ Cox: “Mr. Speaker, earlier on the floor we had discussed our understanding, our clear understanding, that Congress did not, in…”

“Mr. Speaker, earlier on the floor we had discussed our understanding, our clear understanding, that Congress did not, in adopting the Reform Act, intend to alter standards of liability under the Exchange Act. I would add, and I believe the gentlewoman is in agreement, that in Ernst and Ernst v. Hochfelder, 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, where it stated, 'We have explicitly left open the question of whether recklessness satisfies of the scienter requirement.' The Reform Act did not alter the standard for liability under the Exchange Act. The question was expressly left open by the Reform Act for resolution by the Supreme Court on the basis of the statutory language of the Exchange Act.”