Tenth Circuit Extends SEC’s Geographic Reach. Just How Far Is Uncertain.

Expect the Securities and Exchange Commission to scrutinize offshore activity more aggressively after a recent ruling by a panel of the U.S. Court of Appeals for the Tenth Circuit. On an issue of first impression, a two-judge majority held in S.E.C. v. Scoville, No. 17-4059, ___ F.3d ___, 2019 WL 302867 (10th Cir. Jan. 24, 2019), that the Commission may police extraterritorial misconduct so long as it satisfies the conduct and effects test adopted by Congress in Section 929P(b) of the Dodd-Frank Act. Division of Enforcement attorneys should not rush to renew their passports, however. The majority decided the matter under the test’s conduct prong.  That leaves open whether the Commission may pursue cases under the effects prong when targeted misconduct is entirely overseas and involves only overseas securities transactions.

Murphy & McGonigle