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Title: Securities Law
Author: Zanglein, Jayne Elizabeth
Abstract: During the survey period, the Fifth Circuit addressed several issues of increasing importance in the area of securities law. First, the court limited the circumstances under which a federal court may exercise subject matter jurisdiction over foreign securities transactions. The court found no basis to acquire federal jurisdiction over a foreign transaction where the plaintiff, "through extensive machinations," carefully structured the transaction in order to avoid federal securities laws. Next, the court identified the circumstances under which a party may waive a contractual right to arbitration. The Court also addressed whether an arbitration panel must state the reasons for its decision in its award. In three cases, the Fifth Circuit focused on the definition of "security" and "investment contract." The court applied the definition crafted by the Supreme Court in SEC v. W.J. Howey Co. to determine whether a limited partnership, a warehouser, and a cattle-feeding consulting agreement were securities or investment contracts. Finally, the court held that an investment adviser may violate rule 10b-5 by failing to disclose a substantial conflict of interest. The court further held that because an investment adviser is a fiduciary, he is held to a higher standard of care: "an 'affirmative duty of utmost good faith to avoid misleading clients."' It is unclear whether proof of fiduciary status can be used by a plaintiff to offset a weaker showing of one or more elements of a 10b-5 claim.
Related Resources: Click to follow Hein Online link Click to follow Westlaw link
Date: 1991

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