Morrison v. National Australia Bank and the Securities Act of 1933

Abstract

With its 2010 decision in Morrison v. National Australia Bank Ltd. (“Morrison”), the Supreme Court swept aside decades of lower court precedent governing the adjudication of cases involving alleged transnational securities fraud in United States courts. The Court in Morrison sought to clarify when relief under Section 10(b) of the Securities Exchange Act of 1934 is available to plaintiffs in securities cases with cross-border aspects. But Morrison’s repercussions are more far-reaching, extending to other securities-related statutes and even into other areas of law. This paper examines Morrison’s relationship with and application to the Securities Act of 1933 and the federal regulatory scheme it imposed. Part I reviews the Court’s decision in Morrison, summarizes subsequent interpretations by the lower courts of Morrison’s new transactional test for determining whether a plaintiff in a transnational securities fraud case can bring a Section 10(b) claim, and touches on Congress’ partial (and arguably ineffective) attempt to overrule Morrison legislatively. Part II discusses dicta in Morrison concerning the Securities Act, the implication of which is that the same transactional test should apply to claims brought under the Securities Act; this implication, it is argued, rests on a selective and misleading reading of the Securities Act. Part III reviews decisions in private and enforcement actions applying Morrison to Securities Act claims. Part IV takes an in-depth look at Morrison in relation to Section 12 of the Securities Act, contending that the courts have not applied Morrison to this provision correctly (probably leading to erroneous outcomes in at least some cases), but also challenging whether Morrison’s transactional test undermines the fundamental investor protection function of the Securities Act. Finally, Part V explains why Regulation S, a safe harbor from registration with the SEC for offshore offers and sales of securities, remains valid after Morrison, despite some commentators’ views to the contrary.