Extraterritorial Application of the Securities Fraud Statute

In the era of global and relatively borderless business transactions, the federal government's reach in pursuing wrongdoing that occurs outside the United States is particularly relevant to white-collar practitioners. A recent decision from the U.S. Court of Appeals for the Second Circuit limits the government's ability to prosecute securities fraud to those cases involving a domestic security, defined as a security listed on an American exchange or purchased or sold in the United States. Although the defense bar undoubtedly welcomed the decision, it has spawned a number of significant questions, including whether the rule against the presumption of extraterritoriality applies to other criminal statutes; whether and how foreign conduct can be considered at sentencing; and whether recent legislation preempts the decision.'