U.S. Supreme Court Limits Section 10(b) of the Securities Exchange Act to Security Transactions Made on Domestic Exchanges or in the United States

On June 25, 2010, the New York office issued an Alert Memo entitled “U.S. Supreme Court Limits Section 10(b) of the Securities Exchange Act to Security Transactions Made on Domestic Exchanges or in the United States.” On the previous day, the U.S. Supreme Court issued its decision in Morrison v. National Australia Bank, No. 08-1191 (June 24, 2010), which answered the question of whether Section 10(b) of the Securities Exchange Act of 1934 permits cases brought by investors who purchased securities on foreign exchanges. Relying on the text of the Act and the presumption against extraterritoriality, the Court disposed of the nearly four-decade old conduct and effects tests and held that Section 10(b) only reaches “transactions in securities on domestic exchanges, and domestic transactions in other securities.”