39 Pages Posted: 4 Nov 2012 Last revised: 14 Dec 2014
Date Written: December 5, 2014
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