## Facts

- Europe and Overseas Commodity Traders, S.A. (EOC), a Panamanian corporation owned by a Canadian citizen, invested in interests in Paribas Global Bond Futures Fund, S.A., a Luxembourg fund.
- Defendants included Banque Paribas London (a French bank), the Fund, Paribas Asset Management Ltd. (a Bahamian manager), and a Paribas London employee.
- No party to the transaction was a U.S. entity; the offering and management of the Fund were centered outside the United States.
- EOC alleged defendants marketed and sold the Fund interests through telephone calls and facsimiles to EOC’s owner/agent while he was physically in Florida.
- The parties agreed that purchase orders for the Fund interests were placed from Florida.
- EOC sued in the Southern District of New York asserting federal claims for unregistered securities sales, sale of interests in an unregistered investment company, and securities fraud (including Exchange Act § 10(b) and Rule 10b-5), plus related claims.
- The district court dismissed the complaint on the ground that the federal securities laws did not apply to the transaction, and thus the case could not proceed on the asserted federal theories.

## Issues

1. Whether an offshore offering and sale of interests in a foreign fund to a foreign purchaser becomes subject to the Securities Act’s registration provisions based on telephone/fax solicitations into the United States and orders placed from Florida.
2. Whether the Exchange Act antifraud provisions (including § 10(b) and Rule 10b-5) apply to the alleged misstatements and deceptive practices where the transaction and principal actors are foreign and U.S. contacts consist primarily of communications into Florida.
3. Whether the alleged U.S. contacts satisfy the Second Circuit’s transnational “conduct” or “effects” standards for applying federal securities law to predominantly foreign transactions.

## Decision

- The Second Circuit affirmed dismissal of the complaint.
- The court held the transaction was predominantly foreign and the limited U.S. contacts (telephone/fax communications to Florida and orders placed from Florida) were insufficient to bring the offering within U.S. registration requirements.
- The court further held the alleged facts did not satisfy the conduct or effects standards needed to apply the federal antifraud provisions to this foreign-centered transaction.

## Legal Principles

- Predominantly foreign securities transactions are not brought within U.S. securities law solely because communications are sent into the United States to a foreign principal temporarily located there or because orders are placed from U.S. soil.
- For transnational antifraud claims under § 10(b) and Rule 10b-5, application requires either substantial wrongful conduct in the United States or substantial effects on U.S. markets or U.S. investors; incidental domestic communications, without more, are inadequate.
- In assessing registration-related claims involving offshore offerings, courts look to the overall foreign character of the offering and the significance of U.S. contacts, not merely whether solicitations reached a person located in the United States.

## Conclusion

The Second Circuit concluded that a foreign investor’s purchase of interests in a foreign fund from foreign defendants remained outside the reach of U.S. registration and antifraud provisions where the only domestic connections were limited phone/fax contacts and ordering activity from Florida, and it affirmed dismissal of the federal securities claims.


Europe & Overseas Commodity Traders, S.A. v. Banque Paribas London, 147 F.3d 118 (2d Cir. 1998)