The U.S. District Court for the Central District of California held on May 20, 2016 that the federal securities laws do not apply to U.S. transactions in unlisted, unsponsored American Depositary Receipts (ADRs) for a foreign issuer’s shares. The decision in Stoyas v. Toshiba Corporation also held that principles of international comity and forum non conveniens precluded U.S. investors from asserting claims under Japanese law arising from purchases of Toshiba securities on a Japanese stock exchange.

The Toshiba ruling is perhaps the first court decision squarely holding that the federal securities laws do not apply to unlisted, unsponsored ADRs. The decision reinforces the U.S. Supreme Court’s effort to curtail the reach of U.S. securities laws and to allow other countries to regulate securities transactions on their own markets. The decision also cuts off attempted end-runs around those principles through assertions of foreign-law claims in U.S. courts.  To read more, please see our client alert here.