The Dodd-Frank Extraterritorial Jurisdiction Provision: Was It Effective, Needed or Sufficient?
Harvard Business Law Review, Vol. 1, 2011
37 Pages Posted: 1 Jul 2011
Date Written: 2011
In Morrison v. National Australia Bank, the U.S. Supreme Court ruled in June 2010 that securities fraud suits could not be brought under Section 10(b) of the Exchange Act against foreign defendants by foreign plaintiffs who bought their securities outside the United States (so called, “f-cubed,” securities litigation). The Court held that Section 10(b) reaches only fraud in connection with the, “purchase or sale of a security listed on an American stock exchange, and the purchase or sale of any other security in the United States.” Congress responded to Morrison with Section 929P of the Dodd-Frank Act, which gives federal courts jurisdiction over some similar cases if they are brought by the SEC or the Department of Justice (DOJ).
This article discusses alternative explanations for why Congress used extraterritorial jurisdiction language in Section 929P instead of directly addressing the reach of Section 10(b) on the merits, and whether as a result Section 929P does nothing more than confer jurisdiction on federal courts that the Morrison opinion already recognized courts have over all Section 10(b) cases. This article also discusses whether Section 929P reinstates for SEC and DOJ suits some of the case law in the courts of appeals that was overturned by Morrison, and if so, how that case law is to be applied. This article discusses whether Section 929P is retroactive, and how Section 929P likely will be used by the SEC and DOJ in insider trading and other cases. Finally, this article discusses whether Section 929P was necessary given the SEC’s already expansive enforcement authority under Section 10(b) and whether Congress should have taken the opportunity to address other more pressing post-Morrison issues in Dodd Frank. These issues include the status under Morrison of securities listed both in the United States and outside the United States, and the status of off-exchange traded security-based swap agreements, as well as other private transactions where identifying a transaction location is not as easy as it is for exchange traded securities.
Keywords: securities, corporate, corporations, finance, business law
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