Investment Advisers Act

Yesterday, defendant Perry Gruss moved to certify for immediate appeal Judge Sweet’s recent ruling in SEC v. Gruss concerning the extraterritorial application of the Investment Advisers Act. In a case of first impression, Judge Sweet held that that the Supreme Court’s decision in Morrison v. National Australia Bank Ltd., 130 S. Ct. 2869 (2010), did not bar SEC enforcement of Section 206 of the IAA even where the alleged fraud involved a foreign investor subject to a foreign securities regulatory regime. Judge Sweet concluded: “To bar the SEC, the government agency tasked with the job of regulating investment advisers from initiating an action against a domestic adviser because his actions defrauded a foreign investor would defeat the purposes of the IAA.” Judge Sweet’s ruling was the first to consider the implications of Morrison for IAA Section 206 enforcement actions. In Morrison, the Supreme Court held that Section 10(b) of the Securities Exchange Act of 1934 did not apply extraterritorially. In seeking certification, Gruss stated that whether Section 206 has extraterritorial reach is “an issue of first impression of national importance” because Section 206 is “one of the key antifraud provisions in the federal securities laws” and is “routinely relied on by the SEC to protect investment funds.” The Second Circuit’s early resolution of the issue therefore could affect “numerous on-going non-public SEC investigations as well as cases pending in district courts across the country.”
Continue Reading SEC Defendant Seeks Certification of Judge Sweet Ruling that Investment Advisers Act Can Be Applied Extraterritorially