A series of recent reports by blue-ribbon bodies have warned that the U.S. capital markets are losing their competitiveness and that foreign firms fear entering the U.S. market. But the reasons given in these studies for this fear usually describe only the complaints and frustrations of domestic U.S. firms. Talk instead to a sophisticated foreign issuer today, and you will hear a very different concern; it is not the Sarbanes-Oxley Act, accounting problems or the Securities and Exchange Commission. Rather, it is fear that listing on a U.S. exchange exposes the foreign issuer to potentially bankrupting securities liabilities if its stock price were to decline sharply. This liability would be owed not simply to U.S. investors, but, more importantly, to a much larger worldwide class of foreign shareholders who acquired their shares outside the United States.

In the new vernacular, such a class of foreign purchasers who bought a foreign issuer’s securities on a foreign exchange is now known as an “f-cubed class,” and recent examples of securities class actions predominantly composed of such f-cubed plaintiffs would include Royal Ahold, Royal Dutch Shell, Parmalat, Nortel Networks and Vivendi. See, e.g., In re Vivendi Universal S.A. Sec. Litig., 241 F.R.D. 213 (S.D.N.Y. 2007); Royal Dutch/Shell Transp. Sec. Litig., 380 F. Supp. 2d 509 (D.N.J. 2005); In re Royal Ahold N.V. Sec. & ERISA Litig., 351 F. Supp. 2d 334 (D. Md. 2004).