Section 15(a) Registration And Foreign Transactions

A magistrate judge in the Northern District of Illinois recently ruled that Section 15(a) of the Exchange Act does not apply extraterritorially even if a foreign transaction was facilitated by a broker-dealer in the United States.  In the case, unregistered broker-dealers conducted a foreign stock transaction on a foreign exchange from the United States.  The SEC brought proceedings against the unregistered brokers-dealers and argued that Section 15(a) applies to any person who facilitates a stock transaction in the United States.  The broker-dealers argued that Section 15(a) and Section 10(b) have the same regulatory purpose, and whether a transaction is subject to Section 10(b) depends on whether it was domestic or foreign.  The Court agreed with the broker-dealers and noted that Section 15(a)’s title reveals a focus on national domestic exchanges.  The Court dismissed the SEC’s complaint.