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Direct Actions: A Path to Recovery for Foreign Purchases of Securities

by Serena P. Hallowell, Rachel A. Avan, Thomas W. Watson
The National Association of Public Pension Plan Attorneys (NAPPA) Report |
We provide the current state of court interpretations of Morrison; practical considerations for institutional investors considering foreign actions; and the current state of securities laws of foreign jurisdictions.

Seven years on, the Supreme Court’s opinion in Morrison v. National Australia Bank, 561 U.S. 247 (2010), continues to complicate the ways investors can recover for securities fraud. The holding of Morrison is by now well known: that the U.S. securities laws only provide a cause of action for securities purchased on a national exchange or in a domestic transaction. While this test may seem like a simple way to, as Justice Scalia put it, ensure the securities laws only apply to “domestic, not foreign matters,” what Morrison doesn’t grapple with is the truly global nature of corporations and securities markets. Institutional investment strategies have kept pace with this global trend, and institutional investors are increasingly finding themselves seeking to recover for fraud-related losses on foreign purchased securities. Morrison holds that, no matter the other connections to the U.S., the federal securities laws cannot be used for this purpose.

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