The U.S. Supreme Court has not yet ventured into F-cubed issues, says Chris Caparelli in Inside Counsel

F-Cubed Conflict

March 01, 2010

The U.S. Supreme Court has never considered whether the anti-fraud provisions of U.S. securities law extend to "foreign-cubed" (F-cubed) securities lawsuits. F-cubed suits occur when foreign purchasers of securities sue foreign issuers for violations of U.S. securities laws with respect to securities traded on a foreign exchange.

These lawsuits have attracted appellate courts' attention. But the courts have not been able to agree on an appropriate test for assuming subject matter jurisdiction over such lawsuits.

While acknowledging that the "heart of the fraud" test would mandate case-by-case analysis of the impact of domestic conduct, the Second Circuit refused to opt for a bright-line test that ruled out F-cubed actions whenever the fraud had no effect in the United States or on American investors.

Whatever the result, a decision on F-cubed cases would bring securities class action jurisprudence from the high court full circle.

"In recent years, the Supreme Court has looked at loss causation, scienter and the Private Litigation Securities Reform Act of 1995," says Chris Caparelli. "F-cubed issues are an area into which the Supreme Court has not yet ventured, and dealing with them may give the court some sense that it’s closing the loop on securities jurisprudence."

Read the full article here.


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