SCOTUS Bars U.S. Shareholder Fraud Suits Based on Foreign-Traded Stock
The U.S. Supreme Court has ruled that securities plaintiffs cannot sue in U.S. courts for securities fraud involving stocks traded on foreign exchanges.
The decision curbs suits by foreign investors who want to use U.S. securities laws to sue for fraud, the Associated Press reports. The case was brought by Australian investors who objected to write downs taken by the U.S. mortgage unit of National Australia Bank Ltd., Reuters says in its coverage of the ruling.
Justice Antonin Scalia wrote the majority opinion (PDF) interpreting Section 10(b) of the Securities Exchange Act. “We think that the focus of the Exchange Act is not upon the place where the deception originated, but upon purchases and sales of securities in the United States,” he wrote. The case involves no securities listed on a domestic exchange, he said, and the petitioners’ complaint must be dismissed.
The vote for dismissal was unanimous. Three justices concurred. A concurrence by Justice John Paul Stevens, joined by Justice Ruth Bader Ginsburg, said Scalia’s opinion had applied the wrong test.
