SECURITIES RULING LIMITS CLAIMS OF FRAUD

The U.S. Supreme Court has given multinational companies a powerful new legal defense against fraud claims made by some of their investors, the Wall Street Journal reported today. The weapon for companies grows out of a June ruling that limits fraud claims in U.S. courts by private investors who bought shares on foreign stock exchanges. The Supreme Court decided that Australian shareholders who had purchased stock overseas in an Australian bank could not bring securities-fraud claims in a U.S. court. In order to avoid "incompatibility with the applicable laws of other countries," U.S. securities laws should govern only domestic stock purchases, the court concluded. The ruling means investors such as U.S. public pension funds could see limited recoveries in a number of pending securities actions. Judges have been interpreting the ruling in Morrison v. National Australia Bank Ltd. as preventing fraud claims in U.S. courts by any investor—either from the U.S. or abroad—who purchased shares on foreign exchanges.