One of the single most important developments in private securities litigation in 2010 for foreign issuers, and US issuers that raise capital in foreign markets, was undoubtedly the Supreme Court's decision in Morrison v. National Australia Bank, 130 S. Ct. 2869 (2010) (See Legal update, Congress acts quickly to curtail the impact of the Supreme Court's recent decision barring the extra-territorial application of US securities laws.) In that case, the Supreme Court held that the anti-fraud provisions of the US securities laws, like Section 10(b) of the Securities Exchange Act of 1934, apply only to:

Consequently, investors who purchased securities on foreign exchanges may no longer seek damages in US courts under the US securities laws.

Since June 2010, when the Supreme Court issued its opinion, plaintiffs' attorneys have struggled to re-interpret Morrison to create a loophole that allows investors in foreign securities to assert fraud claims under US securities laws in spite of the Supreme Court's bright-line test. To date, all of the courts that have ruled on these arguments thus far have rejected them. (See (See Legal update, Plaintiff's attempts to re-write Morrison to apply Section 10(b) to foreign securities encounter resistance from US judges.)

In 2011, it is likely that plaintiffs' attorneys will continue to seek ways around Morrison. In the latest decision to interpret Morrison, the Court dismissed Section 10(b) claims based on swap agreements referencing foreign-traded securities that were executed in the United States and governed by New York law. See Elliot Associates v. Porsche Automobil Holding SE, Civ. Action No. 10-4155, slip. op. at 8-13 (Dec. 30, 2010), (Elliot Associates 2010). The Court was concerned not with the place where the parties entered into the swaps or the law they chose to govern their agreement, but with the underlying nature of the transaction at issue. Because it found that the swaps were the "functional equivalent" of trading in the underlying securities on a foreign exchange, the Court determined that they were beyond the reach of Section 10(b). (Elliot Associates 2010)

But other efforts to circumvent Morrison are expected, and in some cases, already underway. First, investors likely will seek to bring claims under foreign law in US courts. Plaintiffs will also attempt to assert claims in state court under state law. Finally, plaintiffs in some instances will abandon US courts altogether and asset their claims in foreign courts under foreign law. For example; on 10 January 2011, two US plaintiffs firms issued a press release announcing that they had filed a civil action in Utrecht Civil Court on behalf of a specially formed foundation comprised of investors from the US, Europe and elsewhere in connection with the collapse of Belgium-based financial services company, Fortis NV. (See PR Newswire: International investors join forces, 10 January 2011) (Newswire, 10 Jan 2011) The firms touted the foundation's action as " an important new avenue for pursuing international securities claims in the wake of last year's US Supreme Court decision in Morrison and "a valuable template for investor recoveries outside the US." (Newswire, 10 Jan 2011) These investors had previously brought a securities fraud class action in US court, but their claims were dismissed because the Court found that they had no meaningful connection to the US.

In the coming year, the Supreme Court has agreed to review three additional cases, each of which concerns important questions whose resolution promises to have a substantial impact on the landscape of private securities litigation:

2010 was a transformative year for the Securities and Exchange Commission (SEC). At the beginning of the year, the SEC announced a series of reforms designed to substantially strengthen its ability to police the markets. The Enforcement Division was also re-tooled when it was given new mechanisms intended to afford it the type of leverage previously reserved for criminal law enforcement agencies, such as the ability to enter into cooperation, deferred prosecution and non-prosecution agreements. (Legal update, The 'new' SEC takes an aggressive stand on insider trading) According to the Director of Enforcement, the newly-minted cooperation initiative was a "potential game-changer" for the agency. Reinvigorated, the SEC also adopted an aggressive posture towards insider trading cases, many of which targeted foreign nationals and conduct abroad. (Legal update, The 'new' SEC takes an aggressive stand on insider trading) However, at that time, there was a serious question as to whether the SEC would have the resources necessary to effectively prosecute its new campaign.

Midway through last year, Congress came to the aid of the agency. As part of the Dodd-Frank Act, Congress enacted a series of laws designed to give incentives and protections to whistleblowers who voluntarily provide original information to the SEC, expand the reach of the agency's authority to prosecute claims against aiders and abettors, and authorise the SEC to seek more stringent penalties against all defendants in administrative proceedings. (Legal update, Congress empowers the 'new' Securities and Exchange Commission)

By the end of the year, the SEC had taken several significant steps towards meeting its enforcement objectives:

In 2011, the SEC will likely continue to use its new cooperation tools and coordinate with other domestic and foreign regulators in order to maximize its ability to police the US securities markets.