On Feb. 26, 2014, the U.S. Supreme Court decided Chadbourne & Park v. Troice, 134 S. Ct. 1058. It is the latest of three cases the court has decided interpreting the Securities Litigation Uniform Standards Act, or SLUSA, Troice is also the latest of several Supreme Court decisions interpreting the “in connection with” phrase that appears in both SLUSA and Section 10(b) of the Securities Exchange Act. That phrase more than any other determines whether an alleged fraud is sufficiently connected to the purchase or sale of securities that it can be a basis for a securities suit.
Troice, however, should not have a significant impact on the meaning of that phrase because it imposes a limitation that arises from the unique circumstances of that case. This limited impact can be seen by examining litigation arising from the fraud perpetrated by Bernard Madoff. Madoff’s fraud, like the fraud at issue in Troice, raises potential “in connection with” issues because many of the parties that invested with Madoff through feeder funds did not receive the type of securities that can form the basis of a SLUSA defense.
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