SIFMA Argues for 'Bright Line Rule' in Foreign Fraud Cases
February 26, 2010
The Securities Industry and Financial Markets Association (SIFMA) filed an amicus brief in the U.S. Supreme Court Friday in the case of Morrison v. National Australia Bank, seeking a clear standard or "bright line rule" that would leave rulings on foreign cases of alleged fraud to foreign jurisdictions.
The Morrison case involves the right of a group of foreign plaintiffs to sue a foreign issuer based on securities transactions in foreign countries for violations of U.S. securities laws.
This so-called “foreign-cubed” case requires the Court to address the extent of the extraterritorial application of the U.S. securities laws.
“SIFMA’s brief suggests that the Court should decline subject matter jurisdiction in foreign-cubed cases,” SIFMA said in a release. “Such cases undermine the competitiveness of American securities markets, making them less attractive for foreign investment and capital raising, and cause duplicative litigation.”
SIFMA voiced the same concerns in July 2007 when it filed its initial amicus brief before the U.S. Court of Appeals for the Second Circuit.
SIFMA’s most recent brief urges the Court to “adopt a bright line rule that precludes private securities fraud claims against foreign issuers arising out of securities transactions executed on foreign exchanges or in foreign markets.”
Such a rule is necessary, SIFMA said, “to ensure the fairness and predictability that is essential to encourage foreign investment in the U.S. and preserve the preeminence of our capital markets.”
“Our proposed bright line rule approach would ensure that investors who buy securities of foreign companies in foreign markets bring their securities claims exactly where they should expect to – in foreign courts, under foreign law,” said Ira Hammerman, SIFMA’s general counsel.
SIFMA’s brief was joined by a group of business organizations, including the Association for Financial Markets in Europe, the U.S. Chamber of Commerce, the U.S. Council for International Business, and the Association Française des Entreprises Privées.
