International Enforcement Jurisdiction in Securities Law

Table of Contents

A. Basics
I. Occasion for Subject Matter
II. Delimitation of Subject Matter
III. Impact of International Law on Subject Matter
IV. Applicable Law and Subject Matter
V. The Presumption against Extraterritoriality v. Rule-by-rule Approach .

B. Antifraud Liability
I. Extraterritorial Application of Rule 10b-5
1. Text of Rule 10b-5 and its Interpretation in Morrison v. National Australia Bank Ltd
2. The Effect of Dodd-Frank
3. Conduct and Effect Test
II. Extraterritorial Application of §§ 14 and 20a WpHG
1. Insider trading
2. Market manipulation
III. Conclusion

C. Registration Requirement for Public Offerings
I. Extraterritorial Application of § 5 Securities Act
1. Text of § 5 and its Interpretation by the SEC
2. Regulation S
II. Extraterritorial Application of § 3 WpPG
III. Conclusion

D. Obligations of Periodic Disclosure
I. Extraterritorial Application of § 13 (a) Exchange Act
II. Extraterritorial Application of §§ 37v, 37w and 15 WpHG
III. Conclusion

E. Conclusion and Critique

F. Bibliography

A. Basics

I. Occasion for Subject Matter

Money makes the world go round. If not a truism, at least it holds for financial markets. The amount of capital traded thereupon outreaches human imagination by far.^[1] At the same time, financial markets create specific dangers for their participants. These dangers are essentially predicated upon information asymmetries between companies as capital seekers and investors as capital providers. The traditional approach to eliminate these information asymmetries is by regulation rather than leaving the solution to the market mechanism^[2]. Thus, financial markets are regulated markets.

The means of such regulation are usually twofold. First, capital seekers are imposed upon a duty to disclose material information. Secondly, if they do not sufficiently comply with this duty, sanctions are imposed. This, of course, poses the question of who can enforce these legal rules. The answer is twofold. Some rules create private causes of action enabling the impaired party to seek relief with the courts. Others provide for enforcement by an administrative agency.

This, however, raises the question which agency is called to perform this task. Traditionally, the answer has been easy as financial markets used to be national markets. Consequently, pursuant to traditional concepts of sovereignty in international law, each country could and would determine the competent agency. Regulation was and still mainly is national.^[3] Meanwhile, globalization and the revolution in telecommunication technology have blurred the borderlines between originally separated financial markets. Financial markets are now becoming international markets.

This reveals an incongruity. Although financial markets are international markets, they are nationally regulated. One might suggest implementing an international regulation to avoid this discrepancy and, indeed, such aspirations can be found to a certain extent.^[4] However, on a global stage a uniform

regulatory system seems highly unrealistic.^[5] Thus, it still falls to national regulators to meet the challenges by the internationalization of financial markets. This paper intends to explore how the United States and Germany grapple with this issue by analyzing the ambit of international enforcement jurisdiction in securities law.

II. Delimitation of Subject Matter

Enforcement jurisdiction is a subset of the general concept of jurisdiction. Jurisdiction itself is a term with many facets.^[6] In a broad sense, it means a state’s legal power whether to act and how to act. Enforcement jurisdiction - sometimes called “competence” - means the legal power of a state to enforce its rules by administrative agencies.^[7] It can and has to be distinguished from two other subsets of jurisdiction: on the one hand, legislative jurisdiction - also called “jurisdiction to prescribe” - which refers to the jurisdiction of a state to enact laws by its legislative bodies;^[8] on the other hand, judicial jurisdiction - also referred to as “jurisdiction to adjudicate” - which comprises the jurisdiction of a state to adjudicate legal disputes by its courts.^[9]

Notwithstanding the focus on enforcement jurisdiction, there are interrelations with the other subsets of jurisdiction that trigger their implication to a certain extent. In this paper the term “jurisdiction” will be used in the sense of “enforcement jurisdiction” unless otherwise indicated.

The reference to enforcement jurisdiction in securities law implicates another restriction on the subject matter. Therefore, this paper focuses on enforcement jurisdiction of agencies in the United States and Germany administering securities law, i. e. the Securities and Exchange Commission (SEC) and the “Bundesanstalt für Finanzdienstleistungsaufsicht” (BaFin).^[10]

International enforcement jurisdiction in securities law means that purely national cases are outside the scope of this paper. However, the assumption of an international case just requires the existence of at least one legally relevant fact pointing to another state than all other facts.

III. Impact of International Law on Subject Matter

The regulation of international transactions raises the question to which extent international law constrains national states’ power to vest jurisdiction in their legislative, judicial and administrative bodies. International law is based on the notion of sovereign and equal states.^[11] Sovereignty of a state, the base for its jurisdiction, gears to a specific territory and a specific population. States have the power to address all people, property and activities in their territory, and their nationals even outside their territory. These concepts are well known as principles of territoriality^[12] and nationality^[13].

At the same time, equality of states implies that each state is equally sovereign. This limits each state’s sovereignty to the extent that its actions would interfere with the sovereignty of another state.^[14] However, it is unclear which conclusion to draw with respect to jurisdiction. With respect to legislative jurisdiction, one might well argue that the mere applicability of regulation to an international case cannot touch another state’s sovereignty since it does not force this other state to defer to the will of the regulating state. As a consequence, there would be no restrictions on legislative jurisdiction. However, an interference with a state’s sovereignty occurs when the regulating state tries to enforce its law with respect to an international case. This at least implies the desirability, if not necessity, of limitations on enforcement jurisdiction of states.^[15] Such a limitation could be seen in the requirement of a “genuine link”, as it has been established in the famous Nottebohm case by the International Court of Justice,^[16] between the regulating state and the issue to be regulated. Notwithstanding the problem of transferability of the reasoning of Nottebohm, the “genuine link” requirement only reveals that international law is violated if there is no connection at all with the regulating state.^[17] On the other hand, it remains uncertain which kind of connection is necessary to comply with the “genuine link” requirement. Besides, there is no generally accepted rule of conflict if the principles of territoriality and nationality run afoul but the vague standard of international comity is invoked to resolve conflicts.^[18] As a result, international law is of little guidance and essentially leaves to the national states the extent to which they endow their organs with jurisdiction.

IV. Applicable Law and Subject Matter

If you analyze the various provisions granting authority to the SEC^[19] for textual support how far its jurisdiction extends in an international context, one will not find any explicit reference. However, at least a preliminary answer can be implied. All pertinent provisions gear to the enforcement of the underlying substantive law. Meanwhile, this reference is always to U.S. substantive securities law. This corresponds with the traditional notion that the enforcement power of an administrative agency is limited to the enforcement of law of its home jurisdiction. In law dominated by public interests, other than in private international law, the application of foreign law is presently not an option.^[20] Instead, jurisdiction and applicable law are strictly synchronized. In conclusion, the jurisdiction of the SEC depends on the applicability of the substantive law to be enforced.

The same is true for the enforcement of the BaFin. The provisions endowing BaFin with jurisdiction do not explicitly address the issue of extraterritorial jurisdiction but gear to the application of the underlying German substantive law.^[21]

V. The Presumption against Extraterritoriality v. Rule-by-rule Approach

The dependence of jurisdiction in securities law on its applicability shifts the matter of analysis to the substantive law area. If substantive securities law is applicable, only then the respective administrative agencies are endowed with jurisdiction.

In the United States, the question of extraterritorial applicability of securities law has often been addressed as if there was a general answer that could be phrased as either “yes, there is extraterritorial applicability” or “no, there is no extraterritorial applicability. ” In particular, courts have long since been arguing about the existence of a presumption against extraterritoriality in securities law. On the assumption of Congress’ silence on the issue,^[22] courts have rejected such a presumption, but rather undertaken the attempt at divining its hypothetical intent, and concluded that Congress would have wanted to apply the securities law in case there is some relevant conduct or effect on markets and investors within the United States^[23] Despite the longstanding pedigree of this judicature, the U.S. Supreme Court has recently reaffirmed the extension of the presumption against extraterritoriality to securities law.^[24]

This is not the place to entertain this argument again, particularly since others have already dealt with this issue in depth.^[25] However, I would like to challenge the feasibility and utility of the underlying assumption that a general and clear “yes” or “no”-answer is possible.

The opposite seems to be quite true. The answer tends to be a specific one for each legal rule at issue depending on its objective. Some objectives may demand for a broader extension in the international context than others in order to be effectively safeguarded. Of course, inasmuch as the objectives of certain rules are identical, the answer can become a more general one and, by assuming, on the highest level of abstraction in securities regulation, the protection of securities markets and its investors as the common goal, this might also hold for the extraterritorial applicability of securities law. Notwithstanding this consideration, assuming the possibility of a general answer in the affirmative or in the negative disregards the notion that legal rules often refer to more than one constituent fact or that one constituent fact can comprise a scheme of actions and omissions. Unless one is willing to affirm, respectively to negate, the applicability as soon as one of these elements, respectively part of an element, manifests a connection with another state,^[26] the answer as to extraterritorial applicability can only be phrased as “the law is extraterritorially applicable to the extent that.” In particular, it needs to be answered which constituent fact is dispositive in determining the extraterritorial applicability and how much is needed to comply with its requirements. In conclusion, a general “yes” or “no”-answer seems to be precluded. Therefore, it does not come as a surprise that there is no discussion about a presumption against extraterritoriality in Germany.

If a general “yes” or “no”-answer is impossible, a rule-by-rule approach is required.^[27] Such an approach demands for a distinct scrutiny of each provision of substantive securities law and the extent to which it applies in an international context.

This paper cannot afford a comprehensive rule-by-rule approach for the whole U.S. and German securities law. Thus, I will limit myself to three important legal principles: general securities antifraud liability, registration requirement for public offerings and disclosure obligations for issuers.

Some theoretical considerations guide this particular choice of issues. The starting point is that regulation can either attach to certain behaviours or certain persons. With respect to financial markets, this means: Regulation either addresses a financial transaction or a particular financial market participant. Antifraud liability and registration requirement for public offerings represent examples of the first category of regulation. They can be interpreted as transaction-related. This means that they establish certain duties in connection with a concrete transaction. However, as will be shown below, they differ with respect to the norm structure to the extent that the first refers to two conducts, the second just to one conduct. In contrast, disclosure obligations for issuers represent an example of the second category of regulation. They can be interpreted as status-related. This means that they establish a duty according to the qualification of a particular person regardless of a concrete transaction. Consequently, together, these principles cover a great part of theoretically conceivable norm concepts in securities law, and, thus, seem to afford a suitable basis for more general observations.

B. Antifraud Liability

The most significant antifraud provision under U.S. securities law is the prohibition of fraud according to Rule 10b-5, enacted by the SEC under the regime of the Securities Exchange Act 1934. In this respect, it is an intricate issue to determine the functional equivalents under German securities law. First of all, there is no catch-all antifraud provision like Rule 10b-5. Instead, German law offers a set of rules related to respectively limited circumstances. First of all, § 44 Börsengesetz (BörsG) provides for liability in the case of misleading or false material information in a prospectus related to the admission to a securities exchange. Comparably, § 13 Verkaufsprospektgesetz (VerkProspG) sets up liability in case of misleading or false material information in a prospectus related to a public offering. Besides, § 14 Wertpapierhandelsgesetz (WpHG) addresses insider trading. Finally, § 20a WpHG proscribes market manipulations. Apart from that, BaFin only has jurisdiction to enforce §§ 14 and 20a WpHG, leaving the enforcement of the prospectus liability provisions to private parties incentivized by the prospect of damages. Consequently, these provisions lie outside the scope of the paper, and the analysis of German law is limited to §§ 14 and 20a WpHG.

I. Extraterritorial Application of Rule 10b-5

1. Text of Rule 10b-5 and its Interpretation in Morrison v. National Australia Bank Ltd.

The formulation of Rule 10b-5 is complicated.^[28] In essence, it can be summarized as the prohibition of any deception in connection with the purchase or sale of a security. The extraterritorial application of this rule raises intricate questions. On its face, it says nothing about whether the two relevant conducts - the deception and the securities transaction - have to occur within the United States or whether it is permissible that one or even both of them can take place abroad.

Considering the wording of Rule 10b-5, the only reference to an international setting is the term “interstate commerce.” This has been defined by § 3 (18) Exchange Act as “trade, commerce, transportation, or communication among the several States, or between any foreign country and any State, or between any State and any place or ship outside thereof.”^[29] This wording is broad enough to cover even cases in which both deception and securities transaction happen to occur abroad. However, the U.S. Supreme Court has rejected this argument in its landmark decision Morrison v. National Australia Bank Ltd,^[30] Systematic references to other Exchange Act rules, advanced for the applicability of Rule 10b-5 in an international context, in particular § 30 (a) and (b) Exchange Act, are of little guidance. Since they deal with issues different from Rule 10b-5, they can be and, in fact, have been interpreted as permitting or preventing an extraterritorial reach of securities law rules other than Rule 10b-5.^[31]

Legislative history reveals the legislator’s strong focus on protection of American stock markets and American investors, especially against fraud on behalf of foreign issuers.^[32] This justifies the assumption that extraterritorial jurisdiction is intended even though the deceptive conduct takes place abroad. On the other hand, one could draw the inference that the transaction always has to be effected within the United States. However, this is far less from clear. In particular, under this premise, American investors would not be protected, even when defrauded within the United States, when the final transaction was consummated abroad, a conclusion that not everyone seems willing to accept.^[33]

However, the majority opinion in Morrison has imlicitly accepted this conclusion, and has found textual support in § 10 (b) Exchange Act^[34], which underlies Rule 10b-5. This provision explicitly gears to “the purchase or sale of any security registered on a national securities exchange or any security not so registered.” Due to the reasoning of the majority opinion, it follows that “the focus of the Exchange Act is not upon the place where the deception originated, but upon purchases and sales of securities in the United States.”^[35] Consequently, it is “only transactions in securities listed on domesticexchanges, and domestic transactions in other securities, to which § 10(b) applies”.

In any case, one might question if this holding is pertinent to the issue of jurisdiction of the SEC because Morrison addressed the extraterritorial jurisdiction of Rule 10b-5 in the context of a private cause of action. One might be prone to limit its reasoning to this scenario and leave enforcement proceedings by the SEC unaffected.^[36] Meanwhile, this seems hardly possible because the U.S. Supreme Court qualified the issue as a matter of substantive law rather than of jurisdiction.^[37] Even though one might consider this exclusive qualification as flawed,^[38] a qualification of jurisdiction as being at least additionally a matter of substantive law is hard to avoid. Conceded this, and aware of, as shown above, the dependency of jurisdiction on the applicability of law, the only consistent solution is to interpret the uniform provision of Rule 10b-5 as two substantive law rules, one of which has to be enforced by private parties considering Morrison and the other one by the SEC unaffected by Morrison.

2. The Effect of Dodd-Frank

The construction as two substantive law rules seems to be quite artificial and, in the absence of any further legislative support, could hardly be convincing. However, Dodd-Frank has added an additional paragraph (b), inter alia, to § 27 Exchange Act, addressing extraterritorial jurisdiction.

[...]

^[1] See Philip R. Wood, Conflict of Laws and International Finance, Rn. 1-009 et seq. (2007) (detailing numbers of trading volume).

^[2] The general economic theory is that information asymmetries lead to market failure. See George Akerlof, The Market for Lemons: Qualitative Uncertainty and the Market Mechanism, 84 Quarterly Journal of Economics, 488-500 (1970).

^[3] See Marc I. Steinberg and Lee E. Michaels, Disclosure in Global Securities Offerings: Analysis of Jurisdictional Approaches, Commonality and Reciprocity, 20 Mich. J. Int'l L. 207, 208 (1999).

^[4] Within the European Union the integration of national capital markets into one European capital market has been tackled during the last decades by the passage of numerous regulations and directives. See Regulation (EU) No 1092/2010 of the European Parliament and of the Council of 24 November 2010 on European Union macro-prudential oversight of the financial system and establishing a European Systemic Risk Board, 2010 O.J. (L 331) 1-11; Directive 2004/39/EC of the European Parliament and of the Council of 21 April 2004 on markets in financial instruments amending Council Directives 85/611/EEC and 93/6/EEC and Directive 2000/12/EC of the European Parliament and of the Council and repealing Council Directive 93/22/EEC, 2004 O.J. (L 145) 1-44; Directive 2003/6/EC of the European Parliament and of the Council of 28 January 2003 on insider dealing and market manipulation (market abuse), 2003 O.J. (L 96) 16-25; Directive 2002/47/EC of the European Parliament and of the Council of 6 June 2002 on financial collateral arrangements, 2002 OJ (L 168) 43-50; Directive 2000/12/EC of the European Parliament and of the Council of 20 March 2000 relating to the taking up and pursuit of the business of credit institutions, 2000 O.J. (L 126) 1-59; Council Directive 93/6/EEC of 15 March 1993 on the capital adequacy of investments firms and credit institutions, 1993 O.J. (L 141) 1­26; Council Directive 93/22/EEC of 10 May 1993 on investment services in the securities field, 1993 O.J. (L 141) 27-46 (repealed by Directive 2004/39/EC); Council Directive 85/611/EEC of 20 December 1985 on the coordination of laws, regulations and administrative provisions relating to undertakings for collective investment in transferable securities (UCITS), 1985 O.J. (L 375) 3-18.

^[5] So far international efforts affecting financial markets have been limited to particular private international law and substantive law matters. See Convention on Substantive Rules regarding Intermediated Securities, http://www.unidroit.org/english/conventions/2009intermediatedsecurities/main.htm; Convention on the Law Applicable to Certain Rights with respect to Securities Held with an Intermediary, signed in Den Haag on 5 July 2006, http://www.legallanguage.com/resources/treaties/hague/july-5-2006/.

^[6] See, e.g., Louis Henkin et al., International Law 1046 (3d ed. 1993); Barry E. Carter & Phillip R. Trimble, International Law 726 (2d ed. 1995); Thomas Buergenthal & Harold G. Maier, Public International Law 159 (2d ed. 1990).

^[7] Stephan Wilske & Teresa Schiller, International Jurisdiction in Cyberspace: Which States May Regulate the Internet?, 50 Fed. Comm. L.J. 117, 171 (1997).

^[8] Id., at 127.

^[9] Id., at 144-145.

^[10] Although these are not the only enforcement agencies in securities law in Germany and the U.S., they are the most important ones.

^[11] See Hans Kelsen, The Principle of Sovereign Equality of States As A Basis for International Organization, 53 Yale L.J. 207, 207 (1944).

^[12] See Wilske & Schiller, supra note 7, at 129 (1997). See also James D. Cox, Choice of Law Rules for International Securities Transactions?, 66 U. Cin. L. Rev. 1179, 1181-82 (1998); James D. Cox, Premises for Reforming the Regulation of Securities Offerings: An Essay, 63 Law & Contemp. Probs. 11, 28-29 (2000) (discussing territoriality in the special context of securities law).

^[13] See Wilske & Schiller, supra note 7, at 131.

^[14] Kelsen, supra note 11, at 209.

^[15] In the United States, the Restatement (Third) of the Foreign Relations Law of the United States in 1986 has acknowledged the necessity of a certain self-restraint in an international setting by asking for the reasonableness of assuming jurisdiction. See W. Barton Patterson, Defining the Reach of the Securities Exchange Act: Extraterritorial Application of the Antifraud Provisions, 74 Fordham L. Rev. 213, 218-220 (2005); Stephen J. Choi & Linda J. Silberman, Transnational Litigation and Global Securities Class-Action Lawsuits, 2009 Wis. L. Rev. 465, 477 (2009).

^[16] Nottebohm (Liechtenstein v. Guatemala), 1955 I.C.J. 4 (April 6).

^[17] In this case, anyway, it seems highly unlikely that a state might be willing to regulate at all.

^[18] See also Joel R. Paul, Comity in International Law, 32 Harv. Int'l L.J. 1 (1991) (comprehensive discussion of international comity).

^[19] See § 8 (b) Securities Act (refusal order regarding effectiveness of registration statement); § 8 (d) Securities Act (stop order regarding effectiveness of registration statement), § 8 (e) Securities Act (investigatory power in conjunction with the decision about stop order); § 8A (cease and desist order); § 19 (a) Securities Act (rule-making power); § 19 (c) Securities Act (investigatory power regarding enforcement of Securities Act); § 28 Securities Act (general exemptive authority); § 4C (a) Exchange Act (power to censure persons appearing before the SEC); § 12 (j) Exchange Act (denial, suspension or revocation of registration regarding securities exchange); §§ 15 (b) (4), 15 (b) (6), 19 (h) Exchange Act (disciplinary sanctions angainst broker-dealers and associated persons); § 15 (c) (4) Exchange Act (compliance order); § 21 (a) Exchange Act (authorizing SEC to enforce Exchange Act, its rules and rules of particular self-regulatory organizations).

^[20] Alan R. Palmiter, Securities Regulation 558 (4th ed. 2008); Hannah L. Buxbaum, Multinational Class Actions Under Federal Securities Law: Managing Jurisdictional Conflict, 46 Colum. J. Transnat'l L. 14, 65 (2007). See also Harold G. Maier, Extraterritorial Jurisdiction at a Crossroads: An Intersection Between Public and Private International Law, 76 Am. J. Int'l L. 280 (1982) (discussing the concepts of unilateral and multilateral approaches).

^[21] See § 4 (1), (2) WpHG (oversight as to the compliance with the WpHG); § 40 WpHG (competency for administrative fines because of violations of WpHG); § 21 WpPG (certain authority as to the compliance with the WpPG); § 30 (4) WpPG (competency for administrative fines because of violations of WpPG); § 4 (1), (2) WpÜG (oversight as to the compliance with the WpÜG); § 61 WpÜG (competency for administrative fines because of violations of WpÜG); § 5 (1), (2) InvG (oversight as to the compliance with the InvG); § 143 (6) (competency for administrative fines because fo violations of InvG).

^[22] See, e.g., Zoelsch v. Arthur Andersen & Co., 824 F.2d 27, 30, 33 (D.C. Cir. 1987); Fidenas AG v. Compagnie Internationale Pour L'Informatique CII Honeywell Bull S.A., 606 F.2d 5, 9 (2d Cir. 1979); Continental Grain (Australia) Pty., Ltd. v. Pacific Oilseeds, Inc., 592 F.2d 409, 416 (8th Cir. 1979); Bersch v. DrexelFirestone, Inc., 519 F.2d 974, 993 (2d Cir.), cert. denied, 423 U.S. 1018 (1975).

^[23] See, e.g., Schoenbaum v. Firstbrook, 405 F.2d 200, 206 (2d Cir. 1968); Zoelsch v. Arthur Andersen & Co., 824 F.2d 27, 30 (D.C. Cir. 1987); Leasco Data Processing Equip. Corp. v. Maxwell, 468 F.2d 1326, 1337 (2d Cir. 1972); Bersch v. Drexel Firestone, Inc., 519 F.2d 974, 993 (2d Cir.), cert. denied, 423 U.S. 1018 (1975).

^[24] Morrison v. Nat’l Australia Bank Ltd., 130 S.Ct. 2869, 2878 (2010). See also Ved P. Nanda & David K. Pansius, 2 Litigation of International Disputes in U.S. Courts § 8:33 (2011) (comprehensive discussion of Morrison).

^[25] See, e.g., Buxbaum, supra note 20, at 21; Donald C. Langevoort, Schoenbaum Revisited: Limiting the Scope of Antifraud Protection in an Internationalized Securities Marketplace, Law & Contemp. Probs., 241, 242-243 (1992); Patterson, supra note 15, at 221, 229-237; Margaret V. Sachs, The International Reach of Rule 10b-5: The Myth of Congressional Silence, 28 Colum. J. Transnat'l L. 677, 681 (1990); John D. Kelly, Let There Be Fraud (Abroad): A Proposal for A New U.S. Jurisprudence with Regard to the Extraterritorial Application of the Anti-Fraud Provisions of the 1933 and 1934 Securities Acts, 28 Law & Pol'y Int'l Bus. 477, 490-498 (1997).

^[26] Obviously, there is nobody championing such a proposal since it would extend, respectively limit, the applicability too sweepingly.

^[27] See Christian v. Bar & Peter Mankowski, Internationales Privatrecht I, § 4 Rn. 95 (2nd ed. 1991) (discussing generally the necessity to determine the extraterritorial applicability for each provision separately); see also Morrison v. Nat'l Australia Bank Ltd., 130 S. Ct. 2869, 2892 (2010) (Stevens, concurring in the judgment).

^[28] It shall be unlawful for any person, directly or indirectly, by the use of any means or instrumentality of interstate commerce, or of the mails or of any facility of any national securities exchange,
a. to employ any device, scheme, or artifice to defraud,
b. to make any untrue statement of a material fact or to omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading, or
c. to engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person, in connection with the purchase or sale of any security.

^[29] Emphasis added.

^[30] Morrison v. Nat’l Australia Bank Ltd., 130 S.Ct. 2869, 2882 (2010).

^[31] See, eg., Kelly, supra note 25, at 480, 482 (interpreting the provision as generally assuming non-extraterritorial applicability). But see, e.g., Schoenbaum v. Firstbrook, 405 F.2d 200, 208 (2d Cir. 1968).

^[32] See Sachs, supra note 25, at 694-709 (detailed analysis of legislative history with respect to this issue).

^[33] See, e.g., Morrison v. Nat'l Australia Bank Ltd., 130 S. Ct. 2869, 2895 (2010) (Stevens, concurring in the judgment).

^[34] Morrison v. Nat'l Australia Bank Ltd., 130 S. Ct. 2869, 2884 (2010)

^[35] It shall be unlawful for any person, directly or indirectly, by the use of any means or instrumentality of interstate commerce or of the mails, or of any facility of any national securities exchange to use or employ, in connection with the purchase or sale of any security registered on a national securities exchange or any security not so registered, or any securities-based swap agreement (as defined in section 206B of the Gramm-Leach- Bliley Act), any manipulative or deceptive device or contrivance in contravention of such rules and regulations as the Commission may prescribe as necessary or appropriate in the public interest or for the protection of investors.

^[36] Morrison v. Nat’l Australia Bank Ltd., 130 S. Ct. 2869, 2895 note 12 (2010) (Stevens, concurring in the judgment).

^[37] Morrison v. Nat’l Australia Bank Ltd., 130 S.Ct. 2869, 2877 (2010). See also Shearman & Sterling, U.S. Supreme Court Rules Against Extraterritorial Application of Antifraud Provisions in “Foreign-Cubed” Case - Financial Reform Bill Would Restore SEC Power, 1, 4 (Apr. 25, 2011, 10:40 PM), http://www.shearman.com/files/Publication/371216e8-360b-4e43-aa90- 2b3b3cb7b0e0/Presentation/PublicationAttachment/b539d7ba-3ebf-49bd-9efe-e0dcb35ed9a9/CM-070810-USSupreme-Court-Rules-Against-Extraterritorial-Application-of-Antifraud-Pro.pdf.

^[38] So, when denouncing the Circuit Courts’ qualification of extraterritoriality as jurisdictional issue, Scalia himself neglects the interdependency between jurisdiction and applicability of substantive law in public law, which can also be observed in § 27 Exchange Act. This interdependency makes it seem more convincing to attach both a jurisdictional and substantive law character to the issue of extraterritoriality.