Cross-Border Shareholder Class Actions Before and After Morrison
16 December 2011
By Dr. Elaine Buckberg and Dr. Max Gulker
In this paper, submitted to the Securities and Exchange Commission (SEC) as part of a public comment process, NERA Senior Vice President Dr. Elaine Buckberg and Senior Consultant Dr. Max Gulker conduct an empirical inquiry into the effect of the Supreme Court's decision in Morrison v. National Australia Bank. In June 2010, the Supreme Court ruled in Morrison that only trades on US markets are covered under the Securities Exchange Act of 1934, significantly limiting the extraterritorial scope of Section 10(b) of the Act. In the wake of the Morrison decision, Section 929Y of the Dodd-Frank Wall Street Reform and Consumer Protection Act directs the SEC to inform Congress about the merits of creating a new extraterritorial right of action. The SEC is soliciting public comment on the matter, and thereafter will conduct a study to determine the extent to which private rights of action under the antifraud provisions of the Exchange Act should be extended to cover transnational securities fraud.
In "Cross-Border Shareholder Class Actions Before and After Morrison," Dr. Buckberg and Dr. Gulker conduct an empirical inquiry into the effect of the Morrison decision. The authors provide input into the debate by using data on 329 shareholder class actions filed against foreign-domiciled companies and discussing the effects of such a right on the competitiveness of US capital markets. They conclude that, following Morrison, foreign companies’ expected litigation costs should fall, because investors who purchased their shares on overseas exchanges will be excluded from classes. By reducing expected litigation costs, Morrison eases a deterrent to US listing by foreign issuers and thereby makes the US a more competitive venue for cross-listings, as well as for the volume in cross-listed stocks.
