The SEC requested comments beginning on October 25, 2010 on possible legislation that would extend extraterritorial private rights of action under Section 10(b) (Securities Law Daily Article). The SEC made this request pursuant to Section 929Y of the Dodd-Frank Act, which directs the SEC to solicit public comments and then conduct a study to determine the extent to which private rights of action under the antifraud provisions of the 1934 Act should be extended to cover transnational securities fraud. The SEC will take comments until on or before February 18, 2011.
The SEC noted in its request that the Supreme Court had significantly limited the extraterritorial scope of Section 10(b) in Morrison v. National Australia Bank, 130 S. Ct. 2869 (2010). The SEC further noted that Congress had restored the Commission's ability to bring actions under Section 10(b) in cases involving transnational securities fraud. The potential extension of the extraterritorial scope of the antifraud provisions raises a number of questions involving investor protection, maintaining fair, orderly and efficient markets, facilitating capital formation, and international comity.
Section 929Y of the Dodd-Frank Act directs the Commission to conduct a study after the public comments have been received and consider among other things: (1) the scope of such a private right of action, and whether that right should extend to all private actors or just extend to institutional investors; (2) what effect such a private right of action may have on international comity; (3) the economic costs and benefits of an extended private right of action for transnational securities fraud; and (4) if a more narrow extraterritorial standard should be adopted.