The Extraterritorial Application of U.S. Securities Fraud Prohibitions in an Increasingly Global Transactional World

Abstract

This draft working paper, prepared for a French academic forum entitled “American Law Today: Identity, Mutations, and Debate,” is a brief essay on the current and potential future extraterritorial reach of Section 10(b) of the Securities Exchange Act of 1934, as amended, and Rule 10b-5 adopted by the U.S. Securities and Exchange Commission under Section 10(b). The essay does three principal things. First, it summarizes the key antifraud rules in context. Next, it describes (in brief) the history and current state of the academic and political debate on the extraterritoriality of Section 10(b) and Rule 10b-5 (including commentary on the U.S. Supreme Court’s opinion in Morrison v. Nat’l Austl. Bank Ltd. and reactions to the recently released report of the Securities and Exchange Commission in compliance with Congress’s mandate under the Dodd-Frank Wall Street Reform and Consumer Protection Act). Finally, before briefly concluding, the essay suggests a way forward for Congress in light of the current state of the extraterritoriality debate.The essay has a very simple general premise: that Congress should clarify the extraterritorial reach of Section 10(b) and Rule 10b-5 and ground its rule firmly in applicable policy: namely, the protection of U.S. investors and markets.