Developments Regarding Extraterritorial Effect of U.S. Securities Fraud Statutes


In June 2010, the Supreme Court overturned years of federal jurisprudence by holding that the U.S. securities fraud laws do not apply extraterritorially in the case Morrison v. National Australia Bank Ltd, 561 U.S. _, 130 S. Ct. 2869 (2010). Within a month of the holding, Congress partially reversed Morrison with the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) by granting the Securities and Exchange Commission (SEC) and the Department of Justice (DOJ) authority to bring enforcement actions under the historical jurisprudence. At the same time, Congress asked the SEC to solicit public comment and conduct a study on whether Morrison should be reversed as to private rights of action as well.

Earlier this year, the SEC released its study on international securities fraud cases since Morrison and explained its stance that the Supreme Court’s holding should be reversed for private rights of action. That same day, an SEC Commissioner issued a statement dissenting from the SEC’s study, finding that it fell short of providing an informed recommendation to Congress because the study did not provide a strong enough case to fully repeal Morrison. Needless to say, the holding in Morrison is under intense scrutiny.

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