Broker-Dealer Litigation - Greenberg Traurig LLP

A hedge fund filed suit against international corporations, their executives and
subsidiaries, alleging violations of federal and state securities laws and various other state law
causes of action. All of the defendants moved to dismiss. With respect to defendant Credit
Suisse and its Swiss broker, the court found that advice given by the broker to the plaintiffs, on
behalf of Credit Suisse, had the unmistakably foreseeable effect within the United States that the
Plaintiffs would rely on the broker’s representations. The court found this sufficient to establish
personal jurisdiction over Credit Suisse and its broker. With respect to the German broker
purportedly involved in manipulating the market in certain securities in which the plaintiff
invested, the court found it lacked jurisdiction because there was no indication that the broker
had traveled to the United States in furtherance of the scheme, exerted any control over agents in
the United States involved in the scheme, or had any contacts with the plaintiff. Nor did the
court have personal jurisdiction over a British corporation and its South African principal
shareholder, because, though purportedly involved in the scheme, the plaintiff’s conclusory
allegations of market manipulation failed to establish that these defendants had sufficient
contacts with the United States. Finally, the court found that it did have jurisdiction over a
German limited liability company and its managing director, based on the fact that the managing
director directed the plaintiff to purchase shares in the allegedly manipulated stock.
Prime Mover Capital Partners L.P. v. Elixir Gaming Techs., Inc., 761 F. Supp. 2d 103 (S.D.N.Y.
2011).
Hedge funds brought a securities fraud action against an issuer of securities, a Hong
Kong corporation that later gained control of the issuer, and the Hong Kong corporation’s
chairman, a citizen of Canada residing in Hong Kong. The latter two defendants moved to
dismiss for lack of personal jurisdiction. The plaintiffs asserted that specific personal
jurisdiction existed under the Securities Exchange Act of 1934. The court found that the
plaintiffs’ Exchange Act claim was based on allegations that they relied to their detriment on
false and misleading statements by the issuer. Because they claimed no injury as a consequence
of anything allegedly done by the Hong Kong corporation or its chairman, let alone any injury
arising out of or related to their contacts with the United States, the court lacked personal
jurisdiction over the foreign defendants.
SEC v. Compania Internacional Financiera S.A., 2011 WL 3251813 (S.D.N.Y. July 29, 2011).
The SEC brought an enforcement action against a United Kingdom-based investment
manager, in connection with its purchase in the U.K. of “contracts for difference” regarding the
shares of a United States company that were traded on the New York Stock Exchange. The SEC
accused the investment manager of trading in the contracts based on insider information, which
constituted trading in securities of a U.S. corporation that was inextricably linked to the purchase
or sale of that corporation’s common stock on the NYSE. The investment manager contended
that personal jurisdiction was improper because the trades were conducted entirely in London,
and any effects on the United States were indirect. But the court rejected this argument, citing
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