Has California Lost Its Jurisdictional Anchor For Securities Fraud Actions?

Does California’s securities fraud statute apply to offers and sales of securities that are made in other states, in Europe, or on the moon?  Actually, there is no way to know.  Formerly, California Corporations Code Section 25401 began “It is unlawful for any person to offer or sell a security in this state or offer to buy a security in this state . . .”.  Corporations Code Section 25008 defines when an offer or sale of security or an offer to buy occurs “in this state”.  See California’s Blue Sky Law Problems for Foreign Issues and Foreign Issuers, 23 Insights 28 (July 2009) and Yes, There is no “S” in California.

When California amended Section 25401 in 2013, the legislature inexplicably dropped “in this state” from the statute, thereby loosing the statute from any jurisdictional anchor.  I doubt that the legislature actually intended to extend the reach of Section 25401 to offers and sales occurring entirely out of state.  In fact, it left the “in this state” requirement in Sections 25400 and 25402.  See NY District Court Finds That Same Plaintiff In ARS Case Has No California Securities Law Claims.


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