The Dangerous Extraterritoriality of American Securities Law

Choi, Stephen J., Guzman, Andrew T. | January 1, 1996

The capital markets within the United States are among the larg- est in the world. Today, the combined volume of the New York Stock Exchange (NYSE), American Stock Exchange (AMEX) and Nasdaq market system reaches approximately $4 trillion dollars annually.’ With the size of the U.S. markets has come an understandable pride in the success of the American regulatory system.2 Possessing one of the most complex and intricate of regimes, the regulatory system in the United States, as administered and monitored by the Securities and Exchange Commission (SEC), is often praised.3 Not surprisingly, perhaps, the United States has frequently attempted to extend the reach of its regime. Through international negotiations, for example, the United States has successfully exported portions of its insider trading prohibitions – at least formally – to Japan and Switzerland in recent years.4 More directly, the United States often applies its own domes- tic laws extraterritorially to transactions in other countries, justifying its actions as necessary to protect American investors and the integrity of U.S. capital markets.