A Utah federal judge ruled that a provision of Dodd-Frank authorizes the U.S. Securities and Exchange Commission (“SEC”) to bring fraud claims concerning securities bought or sold entirely outside the United States or involving entirely foreign investors, so long as wrongful conduct occurred in or had a substantial effect within the United States.
If adopted more widely, this decision would exempt the SEC from the Supreme Court’s rule, announced in Morrison v. National Australia Bank Ltd., that fraud claims under the federal securities laws can only be brought with respect to securities listed on U.S. exchanges or certain domestic transactions and subject those claims to the prior conduct and effects test that the Supreme Court in Morrison had found to be overly broad, vague and difficult to apply.
This alert memo was republished by the Oxford Business Law Journal.