Do Institutional Investors Value the 10b-5 Private Right of Action? Evidence from Investor Trading Behavior Following Morrison v. National Australia Bank Ltd. (2010)
Robert P. Bartlett III
University of California, Berkeley - School of Law; University of California, Berkeley - Berkeley Center for Law, Business and the Economy
December 5, 2014
Journal of Legal Studies, Forthcoming
UC Berkeley Public Law Research Paper No. 2171006
In Morrison v. National Australia Bank (2010), the U.S. Supreme Court limited investors’ ability to bring private 10b-5 securities fraud actions to cases where the securities at issue were purchased on a United States stock exchange or were otherwise purchased in the U.S. Because many foreign firms’ securities trade simultaneously on non-U.S. venues and on U.S. exchanges, institutional investors claimed after Morrison that they would look to such firms’ U.S-traded securities to preserve their rights under 10b-5. This article tests this prediction using proprietary trading data from 378 institutional investors. The analysis reveals no evidence that investors reallocated trades in cross-listed issuers to the U.S., nor did they reallocate foreign trading to cross-listed issuers that are now clearly subject to 10b-5 securities suits. This persistence in trading appears across both money managers and pension plan sponsors, notwithstanding sponsors’ more vocal criticism of Morrison and their prominence in 10b-5 litigation.
The appendices for this paper are available at the following URL: http://ssrn.com/abstract=2537125
Number of Pages in PDF File: 39
Keywords: 10b-5, securities fraud, class actions, institutional investors
JEL Classification: G15, G18, G23, G38
Date posted: November 4, 2012 ; Last revised: December 14, 2014
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