The Dangerous Extraterritoriality of American Securities Law
Northwestern Journal of International Law & Business, 17:207 (1996)
35 Pages Posted: 16 Nov 2012
Date Written: 1996
The capital markets within the United States are among the largest in the world. Today, the combined volume of the New York Stock Exchange (NYSE), American Stock Exchange (AMEX) and Nasdaq market system reaches approximately $ 4 trillion dollars annually. 1 With the size of the U.S. markets has come an understandable pride in the success of the American regulatory system. 2 Possessing one of the most complex and intricate of regimes, the regulatory system in the United States, as administered and monitored by the Securities and Exchange Commission (SEC), is often praised. 3 Not surprisingly, perhaps, the United States has frequently attempted to extend the reach of its regime. Through international negotiations, for example, the United States has successfully exported portions of its insider trading prohibitions - at least formally - to Japan and Switzerland in recent years. 4 More directly, the United States often applies its own domestic laws extraterritorially to transactions in other countries, justifying its actions as necessary to protect American investors and the integrity of U.S. capital markets.
This Article calls into question the desirability of applying American securities laws extraterritorially. Certainly the goals of protecting investors and ensuring capital market integrity are laudable. However, the use of extraterritoriality to accomplish these goals is both unnecessary and ineffective. Extraterritoriality results in frequent conflicts between the United States and other nations. Furthermore, the application of extraterritoriality limits the ability of investors and issuers to select the securities regime of their own choosing.
Keywords: inernational law
Suggested Citation: Suggested Citation