Research On The Extraterritorial Scope Of The U.S.Securities Law

The United States,as the center of the world securities markets,is attracting many corporates to list their shares on the U.S.securities exchange from all over the world.Facing with a growing number of cross-border securities fraud claims,the U.S.federal courts used to apply the "Conduct and Effect Tests",which was the courts'favorite approaches to determine the extraterritorial reach of antifraud clauses.In the year of 2010,the Supreme Court in Morrison v.National Australia bank("Morrison")concluded that there is no "affirmative indication" in the Exchange Act that Section 10(b)applies extraterritorially.Finding no affirmative indication of an extraterritorial reach,the Supreme Court adopted a new transactional test.Congress promptly responded to the Morrison decision by adding Section 929P(b)(2)of Title IX of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010("Dodd-Frank Act").Section 929P(b)(2)provided the necessary affirmative indication of extraterritoriality for Section 10(b)actions involving transnational securities frauds brought by the Commission and DOJ,which applies the conduct and effect tests.Since the Morrison decision,the lower federal courts have addressed a number of questions regarding the interpretation and application of the presumption against extraterritoriality and transactional test.This article analyzes the extraterritorial scope of the U.S.securities law for the purpose of improving Chinese securities law.In chapter one,from the perspective of the theory of extraterritoriality,describing the concept of legislative jurisdiction as well as exploring the relationship between extraterritorial reach of law and legislative jurisdiction.Then,discussing the international law limits and U.S.domestic law limitations on federal legislative jurisdiction.The international law limits on securities law mainly consist of the territorial principle,nationality principle and international comity.At the same time,U.S.domestic law limitations constitute full faith and credit clause,due process and reasonableness test.In chapter two,discussing the U.S.Securities statues regarding extraterritoriality.Including the Section 17(a)of Securities Act of 1933,Section 10(b)and Section 30 of the Securities Exchange Act of 1934,SEC Rule10b-5 and Section 929P(b)of Dodd-Frank Act.In addition,analyzing a study report--"Study on the Cross-Border Scope of the Private Right of Action Under Section 10(b)of the Securities Exchange Act of 1934",which is studied by the staff of SEC.In chapter three,the article expounds the tests determining the extraterritorial scope of U.S.securities law and Post-Morrison legal developments.The Morrison decision replaced the second circuit's long-standing "conduct and effects tests" for determining the extraterritorial reach of the securities law,and the Supreme Court articulated a new transactional test for when the law applies.In chapter four,the article suggests improving extraterritorial securities rules of Chinese based on the securities statues,related principles and tests of United States.At first,demonstrating the necessity of a sound system of extraterritoriality in Chinese securities laws.At the same time,suggesting to adding a clause involving extraterritoriality in title two of securities law of PRC,as well as the tests that courts should be applied to determine the reach of securities law.