Originally published as a Proskauer Client Alert.

The U.S. Court of Appeals for the Third Circuit added its voice yesterday to the ongoing judicial effort to construe the U.S. Supreme Court’s 2010 decision in Morrison v. National Australia Bank, concerning the extent to which the federal securities laws apply to securities transactions involving transnational elements. The Morrison decision had held that the Securities Exchange Act’s anti-fraud provisions apply only to transactions involving the purchase or sale of (i) “a security listed on an American stock exchange” and (ii) “any other security in the United States.”

In an appellate case of first impression, the Third Circuit ruled in United States v. Georgiou that the OTC Bulletin Board (the “OTCBB”) and the Pink OTC Markets Inc. (the “Pink Sheets”) are not “American stock exchanges” under Morrison‘s first prong. The court also held that transactions in “securities issued by U.S. companies through U.S. market makers acting as intermediaries for foreign entities” satisfy Morrison‘s second prong and are subject to the federal securities laws. This ruling on Morrison‘s second prong follows decisions from the Second and Eleventh Circuits concerning the locus of transactions in securities not listed on U.S. stock exchanges.