Supreme Court to Consider Extraterritorial Application of Securities Laws

by Margaret E. Tahyar, for The Harvard Law School Forum at Harvard Law School, December 13, 2009.

In recent years, securities fraud lawsuits in the United States have increasingly been brought against non-U.S. companies. In October 2008, the United States Court of Appeals for the Second Circuit issued an important decision concerning the extraterritorial application of the U.S. securities laws, Morrison v. National Australia Bank, 547 F.3d 167 (2d Cir. 2008). On November 30, 2009, the U.S. Supreme Court decided to hear an appeal from the Second Circuit’s decision. Non-U.S. issuers with businesses in the U.S. should follow the Morrison case closely, along with legislation that is currently making its way through Congress concerning the extraterritorial application of the U.S. securities laws. These developments may determine the circumstances under which non-U.S. companies can be exposed to private securities fraud suits or regulatory enforcement actions in the U.S.

Background on the Morrison Case and the Extraterritorial Application of the U.S. Securities Laws

The Securities Exchange Act of 1934 does not state whether and to what extent its antifraud provisions apply to extraterritorial conduct involving non-U.S. defendants. The Second Circuit, which sits in New York City and is a particularly influential court in securities law matters, has traditionally used two tests to determine whether U.S. securities laws apply extraterritorially…(continue reading)

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