Second Circuit in US Reaffirms that Section 10(b) Does Not Apply to Predominantly Foreign Transactions (February 2021)
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On January 25, 2021, the Court of Appeals for the Second Circuit held, in Cavello Bay Reinsurance Ltd. v. Stein, that an off-shore securities transaction structured to avoid U.S. registration requirements was “so predominantly foreign” as to fall beyond the territorial reach of the general antifraud provision of the federal securities laws, even though the alleged fraud concerning investment contracts governed by U.S. state law took place on U.S. shores. Cavello is the latest decision from the federal appeals court in New York to identify geographic restraints on U.S. lawsuits concerning cross-border securities transactions.
