Jacopo Crivellaro, BCL candidate, St. Catherine’s College, University of Oxford; J.D., Columbia Law School; LL.B., King’s College, London.
Working Paper 3/2012 (full text PDF)
In Morrison v National Australia Bank the Supreme Court of the United States has addressed for the first time in its history the extraterritorial scope of the US securities laws. In its landmark ruling, the Supreme Court has introduced a new standard for securities suits which allege a fraud or deception in the purchase or sale of securities pursuant to Section 10(b) of the Securities Exchange Act of 1934 or SEC Rule 10b-5. The new standard – the transactional test – restricts the scope of the anti-fraud provisions to “transactions in securities listed on domestic exchanges and domestic transactions in other securities.”
Shortly after the Morrison judgment, Congress sought to revoke some of the effects of the transactional test by introducing Section 929P(b) of the Dodd Frank Act. While Section 929P(b) restores the former more permissive standard for jurisdiction, its scope is limited to suits brought by governmental agencies enforcing the anti-fraud provisions and does not extend to private rights of action. Thus, as currently worded the new transactional test is likely to substantially limit the availability of federal courts for both domestic and foreign investors who have purchased or sold stock in a foreign exchange. Yet, the rigors of the Morrison judgment are being partially circumvented as plaintiffs have sought to bring common law fraud claims in state courts, have attempted to plead foreign securities law in federal courts or are seeking redress in foreign jurisdictions, primarily in Canada. Full text
