Print PDF "US Securities Fraud Jurisdiction Over Transnational Transactions is Extensive but Uncertain, and May be on the Cusp of Change" by Lucinda McConathy published in Financier Worldwide magazine
Lucinda McConathyFinancier Worldwide
December 3, 2009
The United States Supreme Court recently granted a petition for certiorari in a case with potential ramifications for transnational securities trading around the globe, a so-called "foreign-cubed" case in which foreign plaintiffs bought stock of a foreign company on a foreign market but have brought a securities fraud suit in a U.S. court. Plaintiffs argue that conduct occurred in the United States -- a subsidiary of the foreign company located in Florida is alleged to have created fraudulent data for inclusion in the foreign company's financials -- sufficient to create U.S. jurisdiction. The Second Circuit Court of Appeals held that there was no jurisdiction. The U.S. government filed a brief in the Supreme Court taking a surprising position that the issue is not one of jurisdiction at all. It argued that "the geography of an alleged fraudulent scheme" is irrelevant to subject matter jurisdiction, apparently intending to preserve the ability of regulators to sue regardless of the locus of conduct. In its December 2009 issue, Financier Worldwide published the attached article by Richards Kibbe & Orbe Partner Lucinda O. McConathy discussing the issue.