Gatekeeper Liability: A Response to the Financial Crisis

The first financial crisis, triggered by the burst of the U.S. housing bubble, has many causes. One such cause is the failure of gatekeepers, i.e. accounting firms and rating agencies. Consequently lawmakers on both sides of the Atlantic tightened the regulatory regimes for accountants and rating agencies, following the same path they had walked earlier, in response to financial scandals such as the one involving Enron and Worldcom. However, the liability rules for these institutions remained untouched once again so that accountants and rating agencies continue to work under skewed liability regimes. Incentives to err on the side of customers remain strong and unbalanced by adequate liability towards third parties. This article explores legislative strategies for a more symmetrical liability regime. In doing so, it takes a critical view of the recent EU Regulation No. 462/2013.