January 20, 2010

NAB Developments

A couple of items related to the National Australia Bank case. The case is pending before the U.S. Supreme Court and concerns the extraterritorial application of the antifraud provisions of the federal securities laws. Oral argument has been scheduled for March 29, 2010.

(1) The petitioners have filed their merits brief. In their brief, the petitioners argue that the "express terms" of Section 10 of the Exchange Act create subject matter jurisdiction for securities frauds involving the "use of any means or instrumentality of interstate commerce or of the mails" and there is no extraterritorial limitation. Moreover, any issues of foreign relations law or international comity can be addressed by the adoption of the "conduct" test suggested by the SEC and Solicitor General: “the scheme involves significant conduct within the United States that is material to the fraud’s success.”

(2) The National Law Journal has a column (subscrip. req'd) noting that the Supreme Court and Congress are on a "collision course" regarding the question of extraterritorial application. While the Court considers the National Australia Bank case, the House of Representatives has just passed the "Wall Street Reform and Consumer Protection Act" containing a provision similar to the conduct test urged by the petitioners (but arguably even broader because it does not contain the "materiality" requirement). Under Section 7216 of H.R. 4173 - an earlier version of the provision was discussed here - jurisdiction exists if there is "conduct within the United States that constitutes significant steps in furtherance of the violation, even if the securities transaction occurs outside the United States and involves only foreign investors." Whether the Senate will embrace this provision remains to be seen.

Posted by Lyle Roberts at January 20, 2010 10:32 PM | TrackBack
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