SEC Asks Whether Private Rights of Action Should Apply to Non-US Securities Transactions

The SEC is seeking public comment on whether it should apply the broad “conduct and effects” test to private rights of action for securities fraud occurring outside the U.S. The Dodd-Frank Act broadened SEC jurisdiction to cases where U.S.-based conduct constitutes “significant steps in furtherance of the violation” (aka the “conducts test”) or where conduct occurring outside the U.S. has “a foreseeable effect within the United States” (aka the “effects test”). The Dodd-Frank Act requires the SEC to study whether the conduct and effects test should apply to private rights of action and report back to Congress. The conduct and effects test is broader than the one applied by the Supreme Court, which limited private rights of action to securities listed on U.S. exchanges or U.S. transactions in other securities.