In a Supreme Court amicus brief filed today, the Competitive Enterprise Institute (CEI) joined the Securities Industry and Financial Markets Association (SIFMA) in urging the Court to review a ruling that threatens to drastically expand the global reach of U.S. securities laws. The ruling, issued by the Ninth Circuit this past July, involves a foreign issuer of securities who has no presence in U.S. securities markets and whose stock is only listed in Japan. The circuit court held that it could nonetheless be subjected to fraud claims under federal law. The claims involved what are known as unsponsored ADRs—that is, American Depositary Receipts created without any participation by the issuer itself.
The amicus brief argues that the Ninth Circuit’s ruling is contrary to Supreme Court precedent limiting the extraterritorial reach of federal securities law. It potentially subjects every foreign issuer to the risk of U.S. litigation, with the Ninth Circuit becoming “a global ‘Shangri-La’ for securities class actions.”
“The Supreme Court has previously rejected extraterritorial application of the securities laws, and needs to resolve the circuit split here to enforce that principle,” said CEI director of litigation Theodore H. Frank.
The case at issue is Toshiba Corporation v. Automotive Industries Pension Trust Fund, No. 18-486.