President Obama signed the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) on July 21, 2010, which, among other things, codified the ability of the Securities and Exchange Commission (“SEC”) and the United States Department of Justice (“DOJ”) to bring actions under 10(b) of the Securities Exchange Act of 1934 (“Exchange Act”) in cases involving transnational securities fraud. 

Specifically, Section 929P of the Dodd-Frank Act amended the Exchange Act to provide that U.S. district courts shall have jurisdiction over any action brought or instituted by the SEC or DOJ alleging antifraud violations of the Exchange Act if the matter involves: “(1) 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; or (2) conduct occurring outside the United States that has a foreseeable substantial effect within the United States.” 

Although the Dodd-Frank Act did not extend the extraterritorial application of the antifraud laws to private parties, Section 929Y directs the SEC to conduct a study to determine whether private rights of action should be similarly extended to the same extent as that provided to the SEC and DOJ by Section 929P.  The study shall consider among other things:

 (1) The scope of such a private right of action, including whether it should extend to all private actors or whether it should be more limited to extend just to institutional investors or otherwise;

 (2) What implications such a private right of action would have on international comity;

 (3) The economic costs and benefits of extending a private right of action for transnational securities frauds; and

 (4) Whether a narrower extraterritorial standard should be adopted.   

The SEC is accepting public comments regarding issues related to its Study on Extraterritorial Private Rights of Action or before February 18, 2011.  After reviewing all submissions the SEC is required to submit and make its recommendations to the Committee on Banking, Housing, and Urban Affairs of the Senate and the Committee on Financial Services of the House not later than January 21, 2012.