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IN RE UBS SECURITIES LITIGATION: The Continued Limitation of 10(b) and 10b-5 Post Morrison v. National Australia Bank

Written by  Julia Iodice

No. 07 Civ. 11225, 2011 U.S. Dist. LEXIS 106274 (S.D.N.Y. Sept. 13, 2011)

INTRODUCTION

On September 13, 2011, the U.S. District Court for the Southern District of New York addressed the extraterritorial reach of Section 10(b) of the Securities Exchange Act of 1934 (the "Exchange Act") in In re UBS Securities Litigation. For decades, the Second Circuit courts applied the "conduct" and "effects" tests to determine the issue of whether claims arising out of foreign transactions could be brought under Section 10(b). However, in 2010 the U.S. Supreme Court rejected this approach in Morrison v. National Australia Bank and held that the "transaction" test is the appropriate method for analyzing the issue. In In re UBS Securities Litigation, Judge Sullivan held that Morrison foreclosed Section 10(b) claims that arose out of transactions that were executed on foreign stock exchanges, regardless of where the actual purchase order was placed. Consequently, Judge Sullivan granted the Defendants’ motion to dismiss all claims based on purchases of UBS stock that were not executed on domestic exchanges. This decision not only applied Morrison to foreign purchasers, but also extended its application to domestic investors who had purchased shares of UBS stock on foreign exchanges.

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