On June 24, the U.S. Supreme Court decided in Morrison v. National Australia Bank Ltd.,1 that §10(b) of the Securities Exchange Act of 1934 does not provide a cause of action to foreign plaintiffs to recover investment losses relating to foreign-issued securities traded on foreign exchanges (colloquially known as “F-cubed” claims). The opinion for the Court by Justice Antonin Scalia—with his typical flair for the acerbic—delivered a more far-reaching ruling than many anticipated.
The Court threw out the analytical approach that the lower courts had followed for many years, and adopted a simpler, easier-to-administer standard that limits the statute’s application to securities transactions that occurred within the United States and renders irrelevant the location of the underlying deceptive conduct. In doing so, the Court rejected the standard that the Solicitor General had advocated on behalf of the Securities and Exchange Commission, thus not only limiting the threat of claims by classes of foreign investors, but also the reach of U.S. regulators.
Background
