Parkcentral Global Hub Ltd. v. Porsche Automobile Holdings SE

Judge LEVAL joins in this PER CURIAM opinion and concurs in a separate opinion.

In Morrison v. National Australia Bank Ltd., 561 U.S. 247, 130 S.Ct. 2869, 177 L.Ed.2d 535 (2010), the Supreme Court established that, by virtue of the presumption against extraterritorial application of U.S. statutes, § 10(b) of the Securities Exchange Act of 1934, the basic anti-fraud provision of the U.S. securities laws, has no extraterritorial application, and no civil suit under that section may be brought unless predicated on a purchase or sale of a security listed on a domestic *201exchange or on a domestic purchase or sale of another security. See id. at 267, 130 S.Ct. 2869 (“And it is in our view only transactions in securities listed on domestic exchanges, and domestic transactions in other securities, to which § 10(b) -applies”). In Absolute Activist Value Master Fund Ltd. v. Ficeto, 677 F.3d 60 (2d Cir.2012), this Court set forth the means to be used to determine when a transaction in securities is “domestic” such that it may furnish the basis for a suit under that section. We concluded that in order for such a transaction to qualify as domestic, “the parties [must] incur irrevocable liability to carry out the transaction within the United States or ... title [to the securities must be] passed within the United States.” Id. at 69.

In this case, the securities transactions upon which the plaintiffs brought suit were so-called “securities-based swap agreements” relating to the stock of Volkswagen AG (“VW”), a German corporation; the amount of gain and loss in the transactions depended on prices of VW stock recorded on foreign exchanges. The parties accused of fraud are Porsche Automobil Holding SE (“Porsche”), also a major German corporation, and its executives. Their allegedly fraudulent statements consisted of assertions about Porsche’s intentions with respect to the stock of VW; their statements were made primarily in Germany, but were also accessible in the United States and were repeated here by the defendants. The thorny issue presented by this appeal is how to apply the rules established by the Morrison and Absolute Activist decisions to this case.

The plaintiffs, more than thirty international hedge funds, employed securities-based swap agreements pegged to the price of VW shares, which trade on European stock exchanges, to bet that VW stock would decline in value. The positions they took through their swap agreements were roughly economically equivalent to short positions in VW stock, in that they would gain to the extent VW stock declined in value and would lose to the extent it rose. Plaintiffs allege that, in 2008, defendants made various fraudulent statements and took various manipulative actions to deny and conceal Porsche’s intention to take over VW. The plaintiffs allege that they relied on defendants’ fraudulent denial of Porsche’s intention to take over VW in making their swap agreements. When, in October 2008, Porsche made its true intentions public, the price of VW shares rose dramatically, causing the plaintiffs to suffer large losses.

The plaintiffs brought the instant complaints in the United States District Court for the Southern District of New York against Porsche and two of its corporate officers alleging, among other things, that the defendants’ fraudulent statements and manipulative actions violated U.S. securities laws. Following the Supreme Court’s decision in Morrison, the defendants moved to dismiss the complaint because the plaintiffs’ swap agreements referenced securities trading on foreign exchanges. The district court (Harold Baer, Jr., Judge) granted the defendants’ motion, concluding that the swaps were essentially transactions in securities on foreign exchanges.

We affirm the judgment, although on the basis of different reasoning. In our view, the imposition of liability under § 10(b) on these foreign defendants with no alleged involvement in plaintiffs’ transactions, on the basis of the defendants’ largely foreign conduct, for losses incurred by the plaintiffs in securities-based swap agreements based on the price movements of foreign securities would constitute an impermissibly extraterritorial extension of the statute. Our ultimate conclusion that *202this suit seeks impermissibly to extend § 10(b) extraterritorially depends in some part on the particular character of the unusual security at issue. For reasons explained below, we express no view whether we would have reached the same result if the suit were based on different transactions. Out of an abundance of caution, however, we remand the matter to the district court so that it may consider motions, if any, by one or more of the plaintiffs to amend their complaints in response to our decision on this appeal.

BACKGROUND

Because this case comes to us on appeal from the district court’s grant of the defendants’ motion to dismiss, the facts are drawn from the plaintiffs’ complaints, “accepting all well-pleaded allegations in the complaint as true and drawing all reasonable inferences in the plaintiffs’] favor,” Bigio v. Coca-Cola Co., 675 F.3d 163, 169 (2d Cir.2012) (internal quotation marks and brackets omitted), and augmented by matters of which we may and do take judicial notice, see Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308, 322, 127 S.Ct. 2499, 168 L.Ed.2d 179 (2007) (“[Cjourts must consider the complaint in its entirety, as well as other sources ..., in particular, documents incorporated into the complaint by reference, and matters of which a court may take judicial notice.”); ATSI Commc’ns, Inc. v. Shaar Fund, Ltd., 493 F.3d 87, 98 (2d Cir.2007) (“[W]e may consider ... legally required public disclosure documents filed with the SEC, and documents possessed by or known to the plaintiff and upon which it relied in bringing the suit.”).

Porsche’s Alleged Scheme to Acquire VW

Porsche, the well-known German automobile manufacturer, is also an active investor in various securities and derivatives. Indeed, in the fiscal year ending July 31, 2008, the company, under the direction of defendants Chief Executive Officer Wendelin Wiedeking and Chief Financial Officer Holger Harter, derived eighty-eight percent of its total profits from its investments and twelve percent of its total profits from selling motor vehicles.

From late 2005 through 2007, Porsche gradually increased its investment in VW, another well-known German automobile manufacturer, whose shares trade primarily on European exchanges. At the time, a German statute known as the “VW Law” limited any one VW shareholder’s voting rights to twenty percent of the total voting rights, regardless of how many VW shares the shareholder actually owned. In the face of public speculation that the European Court of Justice would soon invalidate the VW Law, Porsche claimed publicly that its acquisition of these shares was intended to prevent a hostile takeover of VW, with which it had important business relationships. Porsche also disavowed any intention to obtain a controlling interest in VW — then defined by the VW Law as eighty percent of the company’s outstanding shares, or seventy-five percent of the shares in the event that other stakeholders agreed to vote in favor of a “domination agreement.”1 By the end of 2007, Porsche had become VW’s largest shareholder, owning thirty-one percent of the company.

The plaintiffs allege that in spite of its public assurances to the contrary, at least *203as early as February 2008, Porsche had developed a secret plan to acquire the minimum seventy-five percent interest needed to gain control of VW.2 Porsche’s problem was that VW’s stock was held in large part by parties who either did not want to, or could not for political or other reasons, sell it. As a result, VW’s “float” — the amount of shares available to the public for trading — was insufficient to allow Porsche to acquire a seventy-five percent stake outright. But if those shareholders unwilling to sell could nevertheless be induced to lend their shares to third parties engaged in short sales of VW stock, the shares would temporarily enter the market, giving Porsche the opportunity to buy them.3 This became the core.of Porsche’s strategy.

The plaintiffs allege that Porsche induced them to bet on a decline in the price of VW shares, Third Amended Complaint ¶ 5, Elliot Assocs., L.P. v. Porsche Automobil Holding SE, 10 Civ. 532 (S.D.N.Y. July 21, 2010) (the “Elliott Compl.”), principally by “expressfly] den[ying] that it would take over VW in the near future,” and thus making VW’s shares “appear[] increasingly overvalued relative to 'the shares of other publicly traded automobile companies,” id. ¶2. The plaintiffs allege that, by concealing its intention to acquire control of VW, Porsche led them to conclude erroneously that the demand for VW stock was lower than it actually was. For these and other reasons, the plaintiffs then entered into various short-sale transactions involving VW stock and into securities-based swap agreements economically equivalent to short sales of VW stock— standing to gain if VW share price fell, and to lose if it rose.

To tap into the market for .VW shares offered by short-sellers such as the plaintiffs, Porsche purchased call options. These gave Porsche the right to buy VW shares at a specified future date and price.4 To hedge against Porsche’s exercise of its option rights, its call option counterparties bought and held the VW shares that short-sellers had sold into the market. The plaintiffs allege that Porsche took various steps to conceal its acquisition of call rights, including buying a sufficiently small number of call options from each of many counterparties so that no one *204counterparty would acquire enough VW stock for hedging purposes as to trigger legal disclosure requirements.

Throughout this period, Porsche made repeated public statements disclaiming any intention to acquire a controlling share of VW, and denying that it was trying to obtain a seventy-five percent stake. The plaintiffs’ investment managers — located in New York City and elsewhere in the United States — concluded, based on the publicly available information, that Porsche was unable or unwilling to acquire control of VW. Because Porsche’s strategy had avoided ■ triggering counterparty disclosures, the investment managers remained unaware that Porsche could at any moment exercise rights to purchase large numbers of VW shares.

The October 2008 Short-Squeeze

Porsche financed its purchase of call options by selling put options on VW stock. These options obligated Porsche to pay its counterparties the difference between a pre-set “strike” price and the actual price of VW stock if the actual price fell below the strike price.5 While revenue from its sale of put options allowed Porsche to covertly fund its purchase of call options, the strategy also carried risks. If the price of VW stock fell, the difference between the share price and the strike price would increase, exposing Porsche to potentially massive liability. Indeed, Porsche had entered into so many of these contracts that it risked insolvency in the event VW stock price fell precipitously.

Through the first three quarters of 2008, VW’s share price continued to rise and Porsche’s strategy proceeded as planned. As the global financial crisis became increasingly serious in late October 2008, however, VW’s stock price began a sharp decline. By October 24, 2008, the price had fallen thirty-nine percent from its average closing price between October 1 and October 17, 2008. As a result, Porsche’s liability to its put option counterparties grew dramatically. The plaintiffs allege that, in a bid to shore up VW’s share price and avert disaster, Porsche finally decided to disclose its theretofore secret plan to the public. On Sunday, October 26, 2008, the company issued a press release entitled “Porsche Heads for Domination Agreement,” revealing that Porsche had acquired 74.1 percent of VW through a combination of direct holdings and call options. Complaint ¶ 66, Viking Global Equities LP v. Porsche Automobil Holdings SE, 10 Civ. 8073 (S.D.N.Y. Oct. 22, 2010) (“Viking Compl.”). The release explained that Porsche hoped to “increase [its VW stake] to 75% in 2009, paving the way to a domination agreement.” Id. And it stated that the disclosure of the actual extent of Porsche’s ownership of VW “should give so called short sellers ... the opportunity to settle their relevant positions without rush and without facing major risks.” Id.

The irony of that statement may have been unintentional, but on the following day, “all hell broke loose.” Viking Compl. ¶ 67 (quoting Mike Esterl and Edward *205Taylor, As Giant Rivals Stall, Porsche Engineers a Financial Windfall, Wall St. J., Nov. 8, 2008, at Al). With Porsche holding 74.1 percent of VW’s shares, and the German State of Lower Saxony holding another twenty percent, just 5.9% of the company’s outstanding shares remained theoretically available for purchase. Short-sellers obligated to acquire and return nearly thirteen percent of-VW’s outstanding shares to the parties from whom they had borrowed them found themselves facing a severe shortage. Compounding the problem, a substantial proportion of the 5.9 percent in the float was held by index funds that would not or could not sell some or all of their shares.

As the market absorbed the news of Porsche’s takeover plan, the price of VW stock began to skyrocket, leaving short-sellers scrambling to purchase the shares they needed to unwind their short sales and limit their losses. That flurry of activity caused the price of VW stock to rise even more rapidly, further increasing the short-sellers’ losses and increasing their desperation to buy shares. This vicious cycle — a “short squeeze” — led the price of VW stock to nearly quintuple from its price during the preceding week. Indeed, for several hours, VW became the most valuable corporation in the world measured by market capitalization. To satisfy some of this demand, Porsche agreed to release five percent of its holdings, obtaining a huge windfall as a result.

When the dust had settled, parties with short positions in VW had lost an estimated total of $38.1 billion, and VW’s share price had fallen back to roughly 2007 levels. German authorities later investigated Porsche and its executives, including Wie-deking and Harter, in connection with these events.

The Plaintiffs’ Securities-based Swap Agreements

The transactions in which plaintiffs incurred the losses that are the subject of this suit were synthetic investments, known as securities-based swap agreements.6 These investments were economically equivalent to short sales referencing VW shares.

A securities-based swap agreement is a private contract between two parties in which they “agree to exchange cash flows that depend on the price of a reference security, here VW shares.” Elliot Compl. ¶ 2 n. 2; see also Don M. Chance, Essays in Derivatives 43 (1998) (“An equity swap is an agreement between two parties for each to make to the other a series of payments in which at least one party’s payments [are] based on the return on a stock or index.”). The U.S. securities laws in effect at the time of the events at issue defined such a swap as “a swap agreement ... of which a material term is based on the price, yield, value, or volatility of any security or any group or index of securities, or any interest therein.” SEC v. Rorech, 720 F.Supp.2d 367, 404 (S.D.N.Y.2010) (quoting section 206B of the Gramm-Leach-Bliley Act, Pub.L. No. 106-102, 113 Stat. 1338 (1999), amended by Pub.L. No. 106-554, § 301(a),114 Stat. 2763, 2763A-451 (2000) (hereafter “Gramm-Leach-Bliley Act”)).7

*206A securities-based swap agreement is a separate and distinct financial instrument from the security it references. See Gramm-Leach-Bliley Act, § 206A. Securities-based swap agreements are designed to roughly replicate the economic effect of owning the referenced share of stock for one counterparty, and shorting the referenced share of stock for the other coun-terparty, without either party taking an actual ownership interest in the reference security. The plaintiffs allege that because they took the “short” side of these synthetic investments, “the swap agreement[s] [would] generate[] gains as the price of VW shares declined and [would] generate[] losses as the price of VW shares rose, achieving an economic result similar to a short sale.” Elliot Compl. ¶ 2 n.2.

Because securities-based swap agreements do not involve the actual ownership, purchase, or sale of the reference security, the securities laws describe swaps as transactions in which the counterparties agree to make certain transfers “without also conveying a current or future direct or indirect ownership interest.” Gramm-Leach-Bliley Act § 206A. Instead, the parties agree to exchange payments calculated by applying the change in price of the reference security — in this case, VW shares — to a pre-determined “notional amount” set by the parties. The parties are free to select any notional amount they choose, regardless of the number of shares actually trading in the reference security.8 Thus, as bilateral agreements to pay money on the occurrence or nonoccurrence of wholly independent events, securities-based swap agreements are essentially wagers on changes in the price of the reference securities.

Although securities-based swap agreements are, in the ways just discussed, different from transactions in many other, less exotic securities, which involve actual transfer of shares, they also share some features with other types of securities. For example, a cash-settled option, like these swap agreements, gives the right to payments based on future change in the *207value of the stock it references, rather than any right or obligation to delivery of the stock itself. See Caiola v. Citibank, N.A., N.Y., 295 F.3d 312, 324-27 (2d Cir.2002) (discussing cash settled options).

Geography of the Dispute

Inasmuch as this appeal involves the applicability of the securities laws to claims involving foreign elements, the location of certain key events, entities, and instruments is essential to our analysis.

The plaintiffs have, to varying degrees, alleged that they entered into the swap agreements referencing VW shares in the United States. Some of the plaintiffs allege that their investment managers “took all steps necessary to transact the securities-based swap agreements” from their offices in New York City. E.g., Elliott Compl. ¶ 149. Others allege that their investment managers “signed a confirmation required by [the] ... swap counter-party in” New York City. Id. ¶ 151. Still others allege more specifically that their “swap transactions were entered into, terminated, and based entirely in the United States, with Deutsche Bank in New York acting as the counterparty,” Complaint ¶ 3, Parkcentral Global Hub Ltd. v. Porsche Automobil Holdings SE, No. 10 Civ. 8074 (S.D.N.Y. Oct. 22, 2010), or that their swap agreements were “entered into with New York-based Morgan Stanley in the United States,” Complaint ¶ 2, Bluemountain Equity Alternatives Master Fund L.P. v. Porsche Automobil Holding SE, No. 10 Civ. 8084 (S.D.N.Y. Oct. 25, 2010), or that their “counterparties were acting 19 on behalf of financial institutions located in New York,” Complaint ¶ 39, Black Diamond Offshore Ltd. v. Porsche Automobil Holding SE, No. 10 Civ. 4155 (S.D.N.Y. July 23, 2010) (“Black Diamond Compl.”). The swap agreements contained New York choice-of-law provisions and forum selection clauses designating New York federal and state courts as the forum in which legal disputes would be heard. See, e.g., Elliott Compl. ¶ 149. The plaintiffs do not allege, however, that Porsche was a party to any securities-based swap agreements referencing VW stock, or that it participated in the market for such swaps in any way.

• Although the securities-based swap agreements in this case may have been concluded domestically, the VW shares they referenced appear to trade only on foreign exchanges. VW shares trade on the Frankfurt Stock Exchange and “international stock exchanges in Switzerland, Luxembourg, and the UK.” Complaint ¶ 36, Seneca Capital LP v. Porsche Automobil Holdings SE, No. 10 Civ. 8161 (S.D.N.Y. Oct. 27, 2010). The plaintiffs do not allege that they are traded on any United States exchange.9

Porsche’s allegedly deceptive conduct occurred primarily in Germany, although the plaintiffs allege that some of Porsche’s statements denying any intention to acquire control of VW were made into the United States or were available here. See, e.g., Viking Compl. ¶ 44 (listing statements made to investment managers in New York or to German and international me*208dia); Elliot Compl. ¶¶ 83-85 (listing statements plaintiffs “believe” Porsche directed into the United States, and that Porsche executives either made in telephone calls or on visits to the United States). As stated, German authorities undertook to investigate Porsche and its executives in relation to these events.

District Court Proceedings

On January 25, 2010, the plaintiffs filed the complaint in Elliott Associates L.P. v. Porsche Automobil Holding SE, No. 10 Civ. 532 {“Elliott”), in the United States District Court for the Southern District of New York,' alleging violations of the federal securities laws and common law fraud. The plaintiffs claimed that Porsche, Wie-deking, and Harter lied about Porsche’s intent to take over VW and hid the extent of Porsche’s control of VW from the market through manipulative options trades. In June 2010, Elliott was consolidated before Judge Baer with another case “involving substantially the same allegations” filed May 20, 2010, Black Diamond Offshore Ltd. v. Porsche Automobile Holding SE, No. 10 Civ. 4155 (“Black Diamond”). See Elliott Assocs. v. Porsche Automobil Holding SE, 759 F.Supp.2d 469, 470 (S.D.N.Y.2010). Following two amendments to the Elliott complaint, the Supreme Court decided Morrison v. National Australia Bank Ltd., 561 U.S. 247, 130 S.Ct. 2869, 177 L.Ed.2d 535 (2010). The parties agreed that a further amendment to each complaint would be necessary in light of that decision. The Third Amended Complaint in Elliott and the Amended Complaint in Black Diamond were filed on July 21 and July 23, 2010, respectively.

The defendants moved to dismiss both complaints pursuant to Federal Rule of Civil Procedure 12(b)(6) based principally on Morrison. Before the motions were fully submitted, four related actions were filed in the Southern District against the defendants arising out of the same operative facts — Viking Global Equities LP v. Porsche Automobil Holdings SE, No. 10 Civ. 8073; Parkcentral Global Hub Ltd. v. Porsche Automobil Holdings SE, No. 10 Civ. 8074; Bluemountain Equity Alternatives Master Fund L.P. v. Porsche Auto-mobil Holding SE, No. 10 Civ. 8084; ,and Seneca Capital LP v. Porsche Automobil Holdings SE, No. 10 Civ. 8161. By stipulation of the parties in all six actions, it was agreed that the district court’s ruling on the pending motions to dismiss in Elliott and Black Diamond would “apply in the New Actions, ... as if the Court had issued those rulings in the New Actions.” Elliott Assocs., 759 F.Supp.2d at 470 n. 1.

On December 30, 2010, the district court granted the defendants’ motion to dismiss the plaintiffs’ federal law claims with prejudice, and declined to exercise supplemental jurisdiction over the plaintiffs’ common law claims. The plaintiffs filed this timely appeal.

DISCUSSION

“We review de novo a district court’s dismissal of a complaint under Rule 12(b)(6), accepting all of the complaint’s factual allegations as true and drawing all reasonable inferences in the plaintiffs’ favor.” Forest Park Pictures v. Universal Television Network, Inc., 683 F.3d 424, 429 (2d Cir.2012). The complaint must state a claim that is plausible on its face. Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). A claim has “facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009). Dismissal is appropriate when “it is clear from the face of the complaint, and matters of which the *209court may take judicial notice, that the plaintiffs claims are barred as a matter of law.” Conopeo, Inc. v. Roll Int’l, 231 F.3d 82, 86 (2d Cir.2000).

I. Liability for Foreign Conduct Under the Federal Securities Laws A. The Antifraud Provision of the Exchange Act

Section 10(b) of the Securities Exchange Act, 15 U.S.C. § 78j(b), makes it unlawful “[t]o use or employ, in connection with the purchase or sale of any security ... or any securities-based swap agreement [,] any manipulative or deceptive device or contrivance in contravention of such rules and regulations as the [Securities and Exchange] Commission may prescribe as necessary or appropriate in the public interest or for the protection of investors.” 15 U.S.C. § 78j(b) (footnote omitted; emphasis added). Rule 10b-5, promulgated by the Commission pursuant to § 10(b), provides:

It shall be unlawful for any person, directly or indirectly, by the use of any means or instrumentality of interstate commerce, or of the mails or of any facility of any national securities exchange,

(a) To employ any device, scheme, or artifice to defraud,

(b) To make any untrue statement of a material fact or to omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading, or

(c)To engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person,

in connection with the purchase or sale of any security.

17 C.F.R. § 240.10b-5. “The underlying purpose of Section 10(b) is to remedy deceptive and manipulative conduct with the potential to harm the public interest or the interests of investors.” Morrison v. Natl Australia Bank Ltd., 547 F.3d 167, 170 (2d Cir.2008) (“Morrison Ct.App.”) (internal quotation marks omitted), abrogated in part on other grounds, aff'd on other grounds, 561 U.S. 247, 130 S.Ct. 2869, 177 L.Ed.2d 535 (2010) (“Morrison”).10

B. Applicability in Cases Involving Extraterritorial Conduct:

Morrison and Absolute Activist Value Master Fund Ltd. v. Ficeto, 677 F.3d 60 (2d Cir.2012) (“Absolute Activist”), comprise the principal case authority in this Circuit governing the application of § 10(b) and Rule 10b-5 to claims involving extraterritorial conduct.

1. Morrison. In the Supreme Court’s 2010 opinion in Morrison, the plaintiffs alleged that National Australia Bank (“NAB”), an Australian corporation, misrepresented the value of assets held by one of its U.S. subsidiaries. Its allegedly fraudulent valuations had originated in the statements of the U.S. subsidiary. Morrison, 561 U.S. at 251-53, 130 S.Ct. 2869. The plaintiffs, Australian nationals who *210had purchased shares of NAB on Australian exchanges, brought an action against NAB in the Southern District of New York alleging violations of § 10(b) and Rule 10b-5. Id. at 252-53, 130 S.Ct. 2869. NAB moved to dismiss the complaint. Applying the so-called “conduct-and-effects test,” the district court granted the motion. We affirmed because “[t]he acts performed in the United States did not ‘comprise the heart of the alleged fraud.’ ” Id. at 253, 130 S.Ct. 2869 (quoting Morrison Ct.App., 547 F.3d at 175-76) (brackets omitted).

The Supreme Court began by asserting the “longstanding principle of American law that legislation of Congress, unless a contrary intent appears, is meant to apply only within the territorial jurisdiction of the United States.” Morrison, 561 U.S. at 255, 130 S.Ct. 2869 (internal quotation marks omitted) (quoting EEOC v. Arabian Am. Oil Co., 499 U.S. 244, 248, 111 S.Ct. 1227, 113 L.Ed.2d 274 (1991) (“Aramco”)). This “canon of [statutory] construction,” which the Court had previously labeled “the presumption against extraterritoriality,” see Aramco, 499 U.S. at 248, 111 S.Ct. 1227, is based on the assumption that “Congress ordinarily legislates with respect to domestic, not foreign matters.” Morrison, 561 U.S. at 255, 130 S.Ct. 2869. Under this presumption, “[w]hen a statute gives no clear indication of an extraterritorial application, it has none.” Id. Applying the presumption to § 10(b), the Court observed that “[o]n its face, § 10(b) contains nothing to suggest it applies abroad.” Id. at 262, 130 S.Ct. 2869. Nor did the statute’s “general reference to foreign commerce in the definition of ‘interstate commerce’ ... defeat the presumption against extraterritoriality.” Id. at 263, 130 S.Ct. 2869. Thus finding “no affirmative indication in the Exchange Act that § 10(b) applies extraterritorially,” the Court “con-cludefd] that it does not.” Id. at 265, 130 S.Ct. 2869.

The Court criticized our Circuit’s use of the conduct-and-effects test for its disregard of the presumption against extraterritoriality, further criticizing the test as unpredictable and difficult to administer. Id. at 257-59, 130 S.Ct. 2869. Rejection of the conduct-and-effects test did not end the inquiry. The Court acknowledged that the “presumption here (as often) [was] not self-evidently dispositive, [and] its application require[d] further analysis.” Id. at 266, 130 S.Ct. 2869. In response to the plaintiffs’ emphasis on the fact that NAB’s allegedly false statements had originated in the United States, the Court observed that it would be “a rare case of prohibited extraterritorial application that lacks all contact with the territory of the United States,” and added that “the presumption against extraterritorial application would be a craven watchdog indeed if it retreated to its kennel whenever some domestic activity is involved in the case.” Id. (emphasis in original). The Court went on to consider what it referred to as the “ ‘focus’ of congressional concern” expressed by the statute. Id. (quoting Aramco, 499 U.S. at 255, 111 S.Ct. 1227).

[T]he 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. Section 10(b) does not punish deceptive conduct, but only deceptive conduct “in connection with the purchase or sale of any security registered on a national securities exchange or any security not so registered.” 15 U.S.C. § 78j(b). Those purchase-and-sale transactions are the objects of the statute’s solicitude.... [I]t is in our view only transactions in securities listed on domestic exchanges, and domestic transactions in other securities, to which § 10(b) applies.

Morrison, 561 U.S. at 266-67, 130 S.Ct. 2869 (citation omitted; emphasis added). *211“With regard to securities not registered on domestic exchanges,” the Court concluded, the statute’s “exclusive focus [is] on domestic purchases and sales.” Id. at 268, 130 S.Ct. 2869 (emphases in original). “Not deception alone, but deception with respect to certain purchases or sales is necessary for a violation of the statute.” Id. at 272, 130 S.Ct. 2869.

The Court also “reject[ed] the notion that the Exchange Act reaches conduct .in this country affecting exchanges or transactions abroad” because “[t]he probability of incompatibility with the applicable laws of other countries is so obvious that if Congress intended such foreign application ‘it would have addressed the subject of conflicts with foreign laws and procedures.’ ” Id. at 269, 130 S.Ct. 2869 (quoting Aramco, 499 U.S. at 256, 111 S.Ct. 1227). The Court observed that securities “regulation[s] of other countries often differ[] from ours as to what constitutes fraud, what disclosures must be made, what damages are recoverable, ... and many other matters.”