Morrison Ten Years Later: The Continued Extraterritorial Scope of the U.S. Securities Laws

Ten years ago, the U.S. Supreme Court issued its landmark decision in Morrison v. National Australia Bank Ltd., which limited the extraterritorial application of the federal securities laws in order to prevent the U.S. from becoming “the Shangri-La of class-action litigation for lawyers representing those allegedly cheated in foreign securities markets.”  In Morrison, the Supreme Court threw out decades of lower court precedent that had applied Section 10(b) if the conduct at issue occurred in the U.S. or had effects felt within the U.S., criticizing that test as unpredictable and inconsistent.  Instead, Morrison found that Section 10(b) allows only claims brought by plaintiffs that (1) transact “in securities listed on domestic exchanges,” or (2) enter into “domestic transactions in other securities.”  Over the last decade, Morrison has had a sweeping impact on the application of the federal securities laws to alleged transnational fraud.  However, it has not yet brought the predictability and consistency it promised — as courts have struggled to apply its transactional focus to the countless ways in which securities are traded in real-world capital markets — and it has spawned a number of unintended consequences that have exposed foreign issuers to liability in U.S. securities class actions where none may have existed before.

Please join panelists Andrew A. Bernstein and Jared Gerber of Cleary Gottlieb Steen & Hamilton LLP, as they discuss:

• The reasoning behind the Morrison decision, including its desire to prevent U.S. courts from becoming a forum for litigating foreign fraud and to provide certainty about whether transactions would be subject to the federal securities laws [10 minutes]
• The difficulty courts have faced under Morrison determining the location of transactions for securities that are not traded on foreign exchanges [20 minutes]
• The uncertainty regarding how Morrison should be applied to issuers with limited involvement in the relevant domestic transaction, including with respect to unsponsored ADRs and derivative transactions [20 minutes]
• Attempts to sidestep Morrison’s limitations by pursuing foreign law claims in U.S. securities class actions [10 minutes]

Program Level: Update

Intended Audience: In-house counsel, outside attorneys, compliance, finance and other allied professionals involved in securities transactions

Prerequisites: None

Advanced Preparation: None