Morrison, Tourre, and the Misguided Interpretation of Rule 10b-5 (The Impact of Dodd-Frank) (Part 7)

Whatever the court decides in SEC v. Tourre, the decision will likely have little broad impact.  The same may be the case for the Supreme Court's analysis in Morrison.

In the Commission's reply to Tourre's motion to dismiss, footnote 1 takes the position that Dodd-Frank in Section 929P effectively reversed Morrison in actions brought by the Commission. 

Dodd-Frank amended Section 22 of the Securities Act and Section 27 of the Exchange Act to reinstate the conduct-effects test.  See Section 929P.  The amendments provide jurisdiction over “conduct within the United States that constitutes significant steps in furtherance of the violation, even if the securities transaction occurs outside the United States and involves only foreign investors” and “conduct occurring outside the United States that has a foreseeable substantial effect within the United States.’’

As a result, the confusion sown by the five Justice majority in Morrison may have only a short term effect.