Second Circuit Rejects 'Listing Theory,' Finds That Cross-Listing on a U.S. Exchange Is Insufficient to Justify an Exception Under Morrison

In a case of first impression, the U.S. Court of Appeals for the Second Circuit recently held in a published opinion that the Supreme Court’s decision in Morrison v. National Australia Bank Ltd., 561 U.S. 247 (2010), precludes Securities Exchange Act of 1934 (“Exchange Act”) claims brought by a putative class of foreign and domestic purchasers of shares of UBS AG — a foreign issuer listed on a foreign exchange — even where those shares were cross-listed on a U.S. exchange. City of Pontiac Policemen’s and Firemen’s Retirement System v. UBS AG, No. 12-4355-cv, 2014 U.S. App. LEXIS 8533 (2d Cir. May 6, 2014). This ruling, which affirmed Judge Richard Sullivan’s dismissal with prejudice of all claims in plaintiffs’ amended complaint, further demonstrates that the focus of U.S. securities laws is on domestic transactions and not the location of the securities exchange or the citizenship of the purchaser. The ruling also establishes that foreign issuers will not incur liability under the Exchange Act simply by cross-listing on a U.S. exchange. Separate from its holdings on Morrison, the court affirmed the dismissal of the remaining securities claims under the Securities Act of 1933 (“Securities Act”) and the Exchange Act, finding that UBS’s alleged general statements regarding corporate policies, regulatory compliance, risk management, and portfolio valuation are immaterial and do not establish scienter. The Second Circuit also affirmed the district court’s decision to deny plaintiffs further leave to amend their complaint.

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