United States Supreme Court Rejects “Extraterritorial” Application of the Securities Exchange Act: Morrison v. National Australia Bank

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The Supreme Court today handed down a sweeping victory for foreign businesses facing securities class actions in United States courts. In Morrison v. National Australia Bank, No. 08-1191, the Court ruled that “Foreign-Cubed” securities class actions—private actions brought on behalf of foreign purchasers of foreign companies’ securities that were sold on foreign exchanges—may not be litigated in United States courts under Section 10(b) of the Securities Exchange Act.1

The Court rejected the fact-intensive “conduct” test, which the Second Circuit had used to determine whether claims based on a foreign transaction could be litigated under the U.S. securities laws. Instead, the Court adopted a bright-line “transactional test”—“whether the purchase or sale is made in the United States, or involves a security listed on a domestic exchange.”

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