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The Presumption Against Extraterritoriality in Two Steps

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For the past twenty-five years, the presumption against extraterritoriality has been the Supreme Court's principal tool for determining the geographic scope of federal statutes. In 2010, Morrison v. National Australia Bank used the presumption to decide the scope of Section 10(b) of the Securities Exchange Act, which prohibits securities fraud. Morrison approached the question in two steps. First, it looked for a clear indication of extraterritoriality to rebut the presumption and found none. Second, it looked to see if application of the statute would be domestic or extraterritorial by examining the focus of the provision. Plaintiffs argued that applying Section 10(b) would be domestic because the alleged fraud occurred in the United States, although they had bought their shares in Australia. The Court disagreed, holding that application of Section 10(b) would be extraterritorial because the focus of the Exchange Act is not upon the place where the deception originated, but upon purchases and sales of securities in the United States, and in this case the transaction occurred abroad.

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