On January 18, 2013, the United States Supreme Court granted certiorari to resolve a circuit split concerning the extent to which the Securities Litigation Uniform Standards Act of 1998 (“SLUSA”) preempts state law claims that indirectly arise out of securities claims. The case could have important implications for investor suits against hedge funds and other investment funds that are not themselves covered by SLUSA, but that are set up for the purpose of investing in equities, options, and other covered securities.

The Supreme Court granted review in three consolidated cases that arose from the $7 billion dollar Ponzi scheme run by Allen Stanford and companies under his control. Stanford perpetrated the scheme by issuing certificates of deposit (“CDs”) from Stanford International Bank that the bank falsely claimed were backed by safe, liquid investments. But the investments did not exist. The bank used proceeds from new CD sales for interest and redemption payments on previously issued CDs.

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