Chicago Journal of International Law


10(b) of the Securities Exchange Act of 1934-the key anti-fraud provision of the US securities laws-has been in force for three-quarters of a century. However, its application to transnational, or cross-border, transactions had been unsettled for decades often leading different courts to conflicting results. The Supreme Court attempted to remedy this problem earlier this year when it decided the landmark case of Morrison v National Australia Bank, Ltd. In that case, the Court addressed the extraterritorial reach of g 10(b) for the first time and issued a bright-line transactional test that limited the application of 10(b) to purchases or sales made in the US or involving securities listed on a domestic exchange. This Article analyzes the Supreme Court's bright-line test and proposes a different standard for the extraterritorial application of 10(b). Under the standard proposed by this Article, a transnational securities fraud violates 10(b) when the fraud involves significant conduct in the United States that is material to the fraud's success and that fraud directly caused the plaintiff's injury. As explained below, this standard strikes the proper balance between advancing 10(b)'s remedial objectives and conserving the scarce resources of US courts and law enforcement authorities for regulation of securities fraud that has a substantial connection to the US.