Amicus Curiae Brief — Richards v. Lloyd's of London

MOTION FILED

JUN 3 1996

5

IN THE

No. 97-1779

Supreme Court of the United States

OCTOBER TERM, 1997

ALAN RICHARDS, ET AL.,

JOHN R. NORTON, Ill, ET AL.,

Petitioners,

V.

LLOYD’S OF LONDON

AN UNICORPORATED ASSOCIATION, ET AL..

Respondents.

On Petition for a Writ of Certiorari to the

United States Court of Appeals for the Ninth Circuit

BRIEF OF THE NORTH AMERICAN SECURITIES

ADMINISTRATORS ASSOCIATION, INC. AMICUS CURIAE

Karen M. O’Brien

General Counsel

Counsel of Record

Daniel S. Kahl

Associate Counsel

North American Securities

Administrators Association,

Inc.

10 G Street NE, Suite 710

Washington, DC 20002

(202) 737-0900

No. 97-1779

IN THE

Supreme Court of the United States

OCTOBER 1 ERM, 1997

ALAN RICHARDS, ET AL.,

JOHN R. NORTON, III, ET AL.,

Petitioners,

V.

LLOYD’S OF LONDON

AN UNICORPORATED ASSOCIATION, ET AL.,

Respondents.

On Petition for a Writ of Certiorari to the

United States Court of Appeals for the Ninth Circuit

MOTION FOR LEAVE TO FILE BRIEF AS AMICUS CURIAE

AUTHORITY TO FILE

Request for permission to file an amicus curiae brief was solicited

from the Petitioners and the Respondents. Petitioners granted

permission, Respondents indicated they do not oppose the filing of

the brief.

The North American Securities Administrators

Association, Inc. (“NASAA”) is the organization having as its

members the securities regulators of the fifty states, the District of

Columbia, Puerto Rico, the Canadian provinces and territories and

the Republic of Mexico (“Members”). NASAA through its

undersigned counsel, moves this Court pursuant to Rule 37 for

leave permitting NASAA to file a brief as amicus curiae in the

above-referenced petition for writ of certiorari.

NASAA has an interest in this appeal for several reasons.

First, all but a few states have residents that invested in Lloyd’s of

London (“Names”), some of whom are Petitioners. Second, those

same states participated in a national agreement in an effort to

resolve claims by the Names. In addition, several states brought

enforcement actions against the Respondents. Third, if certiorari is

granted, this Court would be interpreting provisions of the

Securities Act of 1933 and the Securities Exchange Act of 1934

that are virtually identical to a provision contained in the Uniform

Securities Act, upon which state securities acts are modeled.

Finally, the interpretation of the provisions could potentially have a

deleterious effect on the ability of state securities regulators to

protect their citizens.

NASAA asserts that it is desirable for the Court to grant

this motion for two primary reasons. First, NASAA is in the

unique position as a member organization encompassing all the

State securities regulators to inform the Court of the potential

impact on state securities regulators’ efforts to protect investors.

Additionally, any interpretive position taken by this Court on the

provisions will establish precedent that most likely will be

followed by state courts.

NASAA respectfully requests that it be granted leave to

appear as amicus curiae and be permitted to submit a brief for the

Court’s consideration on the Petition for Writ of Certiorari.

Dated this 3 day of June, 1998.

KAREN M. O’BRIEN

General Counsel

North American Securities

Administrators Association, Inc.

10 G Street, N.E., Suite 710

Washington, D.C. 20002

(202) 737-0900

QUESTION PRESENTED

Whether provisions, included by Congress in two separate federal

securities statutes, rendering void any agreement to waive

compliance with those laws (“antiwaiver provisions”) can be

dismissed by a United States court based on a public policy

determination that a contractual choice of law provision

compelling the application of a foreign law provides for similar,

but not identical, substantive rights as the federal statutes.

il

TABLE OF CONTENTS

Page

CUES TIN PRESENTED 6d i

BP Re Rr Ee Ei ooo os kk i RRS il

of FR Bg ter ls Ol COR Pre iil

STATEMENT OF INTEREST OF AMICUS CURIAE............. |

SUMMARY OF THE ARGUMENT ..........cccccccccccccccccccssccess 3

PTE boi vive co esis ceeuesesnecesessecsrensesssaseeccaseneensesenuee 3

1. THE PUBLIC POLICY INTENT OF

CONGRESS IS CLEAR AND EMBODIED IN

THE UNAMBIGUOUSLY DRAFTED

PST EW PAL Oe Pe Oeics bce convene cnusiscdcosdevonsses 4

Il. THE COURTS WRONGFULLY ESTABLISHED

AN ALTERNATIVE STANDARD. oo cccccccccccccccccsccccss 7

Ill. CONGRESS IS THE APPROPRIATE BRANCH

OF GOVERNMENT TO AMEND FEDERAL

STATUTES AND TO PERMIT THE

RECOGNITION OF FOREIGN LAWS...................... 9

IV. THE FEDERAL AGENCY RESPONSIBLE FOR

FEDERAL SECURITIES LAWS HAS RECOGNIZED,

IN PART, ONLY ONE OTHER COUNTRY'S LAWS"

AS SIMILAR, AND IT IS NOT THE LAW OF

SPU PUN UEM NG a skp anh evcsaphicdacatuancaveyecosiensenanaananey 10

Se ND av sahnaeik'es 0504s bea nioese eb eakaun dN kenaes ateaencodis 12

ill

TABLE OF AUTHORITIES

CASES Page(s)

Rodriguez de Quijas v. Shearson/American Express, Inc.,

490 U.S. 477 (1989) 20... .ccccccccenscnceenccesecoeccceseersesesens 8

Scherk v. Alberto-Culver Co.,

BUT UTS, SOG UGTA) occ ce ind sin ckncas sc cteesinsene sees scaneaasen’ S

Shearson/American Express, Inc. v. McMahon,

BOOT) SS, 220 CIGGT) noe ccccsuceecscvecnevecsacccstesvanssevsncenses 8

Wilco v. Swan,

FAG US. 427 (1953) 2 5..0cc cc ceccsceccsensonccecensncascsereencess 8

STATUTES

Securities Act of 1933

Ratan 14 ES UG. FI vckccscccinssnceccuctessens le ae Se.

siete Fe 1 TT SO FIG coc uksvanncssiviadsceninrtadecdectscenss 10

Securities Exchange Act of 1934

Section 29(a), 15 U.S.C. 78cC(a) ......... ee ceeeeseee ee eeee ences 6

Uniform Securities Act of 1956

a Ne iolb'n ob dabeannnwasaatehapavese <x eel 6

Cie OUI Sa oko cin nada bb bass convel coteav dB ictbessecbunes 4

a Savaciasdubribwaes nadesuaecaven 4

iv

LEGISLATIVE MATERIALS

Pub. L. No. 104-290 oo cieeeecceesscesesneseceterneeccesanoess 7

SO CIEE, PRs EE AUIOE: chic sid cavdin cbakeccs nes cuedasnsxvieeeneee 7

Een EPs PO TIRE IE Sane de cco ccduadasyickactistanyesscapiecmeevcivinl 9

Fe Wis MI PUR FO ESN ED ca vhccieecraviicades (acevucesariviaysssaerancdias 9

POO Conk I ee Oe cel 5,9

Pec Ns BONG PINE © coh cvs aks kes bine y nc gua skec eal caearanear ee oreeees 4

PANG POM PE TPR oo ae aves capudbascucadeudceerayasks) pakiaeeiansiwine 4

MISCELLANEOUS

Brief of Amicus Curiae Securities and Exchange Commission,

Richards v. Lloyd's of London (99 Cir.) .........ccccccceeeeeeeeeees 12

Oa NE Sao seca vdmaanah o4ausies ban oun ici bandnaudavexoaes 9

Darrell Hall, Note, No Way Out: An Argument Against Permitting

Parties to Opt Out of U.S. Securities Laws in International

Transactions, 97 Colum. L. Rev. 57 (1997) .............cccceeceeeeees 8

NASAA Resolution on Multijurisdictional Disclosure System ...1 1

New York Stock Exchange Web Site ..............cccccesccesceeceeess 5

Report on the Implementation of IOSCO Resolutions ............... 9

Securities and Exchange Commission Releases

Securities Act Release No. 6568 ..................cccccccecs: 1]

Securities Act Release No. 6841 .............................. 9]

Securities Act Release No. 6902 .......................00000ee 1]

STATEMENT OF INTEREST OF AMICUS CURIAE

In the United States, the offer and sale of securities are

jointly regulated by the states and the Securities and Exchange

Commission (“SEC”). The North American Securities

Administrators Association, Inc. (“NASAA”) serves as the forum

where its members, the securities regulators of the fifty states, the

District of Columbia, Puerto Rico, the Canadian provinces and

territories and the Republic of Mexico (“Members”), work together

to protect investors at the grassroots level against securities fraud

and abuse and to promote fair and open capital markets. NASAA

speaks as the collective voice for its Members in advancing those

interests.

The principal interest of NASAA in the present case is to

urge the Court to ungonditionally uphold the enforceability of the

antiwaiver provisions Congress purposefully placed in the

Securities Act of 1933 (the “1933 Act”) and the Securities

Exchange Act of 1934 (the “1934 Act”) approximately sixty-five

years ago. If the enforceability of these provisions is allowed to be

compromised, the application of a virtually identical antiwaiver

provision contained in the Uniform Securities Act of 1956 (the

“Uniform Act”), upon which individual state securities acts are

modeled, could also be questioned. By allowing the U.S. securities

laws to be negated in this manner (in direct contrast to

Congressional and state legislative intent), U.S. investors will be

relegated to “caveat emptor” status despite carefully crafted and

time-tested federal and state securities laws to protect U.S.

investors.

Even with the combined resources of the state and federal

securities regulators, the burgeoning U.S. securities markets are a

constant challenge to oversee. Congress, as well as state

legislatures, had the foresight to recognize that fact and included

private rights of action within the securities laws to assist in the

' Counsel for a party did not author this brief in

whole or in part. No person or entity, other than

the Amicus Curiae, its members, or its counsel

made a monetary contribution to the preparation

and submission of this brief.

enforcement of such laws. The enforceability of the antiwaiver

provisions is critical to the complementary enforcement efforts of

U.S. investors and U.S. regulators to uphold the rights afforded by

the federal securities laws.

In addition, the antiwaiver provisions serve not only to

maintain the relevance of the U.S. securities laws for individual

U.S. investors, but also to protect the integrity of the U.S.

securities markets asa whole. NASAA_ is concerned _ that

questioning the enforceability of the antiwaiver provisions in

private actions could result in jeopardizing law enforcement

efforts.

Finally, as an advocate for the small, unsophisticated

investor, NASAA is cognizant that small investors do not have

strong bargaining power. As a result, they may be aggressively

solicited to invest in a securities transaction, only to succumb to

pressures to waive their protections under the U.S. securities laws

as a prerequisite to investing, and then, discover they have

purchased worthless securities with no recourse against the seller.

With the increasing attractiveness and ease of investing overseas

brought about by new economic opportunities and the continuing

advancements in telecommunications, U.S. investors will become

targets of such schemes.

NASAA is filing this brief to urge the Court to allow

Congress to make the determination, as it previously did, whether

the antiwaiver provisions are necessary to maintain the protections

of the federal securities laws. In addition, in light of the

increasingly global economic society of today, Congress may

choose to look at the viability of the provisions as well. If these

provisions are now bad law, the lawmakers should change them,

not the courts.

SUMMARY OF THE ARGUMENT

The Court need not look beyond the clear language of the

antiwaiver provisions to determine the question presented. Nor

should the Court feel compelled to interpret the language of the

provisions so broadly as to turn the provisions upside down to

resolve issues of public policy. Congress is the appropriate branch

of government to revise federal statutory language to accommodate

changes in the market place since first included in the federal acts.

Whether creating new laws or revising old laws into new, the

approach must be the same - a deliberative process to consider all

relevant issues and factors.

The rights and obligations of the securities laws represent a

delicate balance between the promotion of capital formation,

critical to the continued prosperity of the U.S. economy, and the

protection of investors, without whom there would be no capital

formation. The substantive laws regulating the U.S. securities

markets represent almost three quarters of a century of such careful

balancing by both Congress and regulatory agencies at the federal

and state level. The circuit courts’ substitution of foreign laws for

U.S. laws could have a devastating effect.

ARGUMENT

By upholding the choice of law provision contained in

contracts between Lloyd’s and the Petitioners, the district court

effectively dismissed the antiwaiver provisions contained in the

federal securities acts. Subsequently, the Court of Appeals for the

Ninth Circuit, sitting en banc in this case, affirmed the district

court’s ruling citing to the “international” nature of the agreements

between private parties as a rationale for discounting a federal

statute directly to the contrary.

I. THE PUBLIC POLICY INTENT OF

CONGRESS IS CLEAR AND EMBODIED

IN THE UNAMBIGUOUSLY DRAFTED

ANTIWAIVER PROVISIONS.

The federal securities laws were put into place as a result

of widespread practices of fraud and deceit in investment

offerings. Although states had securities laws, those who

committed fraud in the early 1900’s practiced their frauds across

state lines, which made it difficult for states to exercise their

jurisdiction.’ Recognizing the need for a national law to assist

state securities laws in the promotion of fair capital markets, the

federal securities laws were enacted.’ Significant consideration

should be given to the fact that the antiwaiver provisions were

included in the first two federal securities acts enacted by

Congress. Their inclusion likely was an attempt by Congress to

prevent the securities markets from backsliding into the fraudulent

practices of the past by simple avoidance of the new laws through

the waiver of their application.

The continued expansion of the U.S. securities markets is a

testament to the fact that participating investors around the world

' See S. Rep. No. 73-47, at 2 (“The necessity for the [Securities Act] arises out of

the fact that billions of dollars have been invested in practically worthless

securities. . . by the American public through incomplete, careless, or false

representations. The result is dire national distress.”); H.R. Rep. No. 73-85, at 2

(“The flotation of. . . essentially fraudulent securities was made possible because

of the complete abandonment by many underwriters and dealers in securities of

those standards of fair, honest, and prudent dealing that should be basic to the

encouragement of investment in any enterprise.”).

? UNIF. SEC. ACT §§ 414, 420 (1956), NASAA Reports (CCH) © 4930, 4932

(July 1997).

* See S. Rep. No. 73-47, at 2 (“It is now imperative that the Federal Government

shall adopt measures looking to the protection of the purchasers of securities in

interstate commerce.”); H.R. Rep. No. 73-85, at 3 (indicating that the status quo

“can no longer be tolerated”).

recognize the integrity, openness, and expansive opportunities

presented by the U.S. markets.’ This confidence in the U.S.

markets has occurred not by happenstance, but rather by effective

securities statutes and rules at the federal and state level that are

enforced against those who would otherwise not choose to

voluntarily comply. Enforcement of such statutes and rules by

federal and state regulators is not enough. Private actions to right

such wrongs are a necessary supplement to the otherwise limited

governmental resources. The antiwaiver provisions provide U.S.

investors with the ability to enforce the U.S. securities laws that

have established the fair and open capital markets that the ever-

expanding investing community now enjoys.

The wording of the antiwaiver provisions in the federal

securities acts is as follows:

Section 14 of the 1933 Act reads:

Any condition, stipulation, or provision binding any person

acquiring any security to waive compliance with any

provision of this title or of the rules and regulations of the

Commission shall be void.°

The parallel provision in Section 29(a) of the 1934 Act

reads:

* See Capital Markets Deregulation and Liberalization Act of 1995, Hearings on

H.R. 2131 Before the Sub. Comm. on Commerce, 104" Cong., 1" Sess. 20 (1995)

(statement of J. Carter Beese, Jr.(“In 1980, foreign purchases and sales of U.S.

securities together amounted to slightly over $75 billion. Fourteen years later, in

1994, that figure tipped $700 billion. . . . Since 1984, the volume of foreign

trading in U.S. securities has risen at a compound annual rate of 18.95 percent,

while the York Stock Exchange volume has grown 12.34 percent annually.”),

quoted in U.S. Treasury Bulletin and New York Stock Exchange Fact Book

(1994); http://www.nyse.com/public/market/2c/2c6fm.htm (visited June 2,

1998) NYSE Reported Share Volume Records, 1997-133,312,115,000).

* 15 U.S.C. §77n (1997).

6

Any condition, stipulation, or provision binding any person

to waive compliance with any provision of this chapter or

of any rule or regulation thereunder, or of any rule of an

exchange required thereby shall be void.°

The Uniform Act antiwaiver provision included in state

securities statutes reads as follows:

Any condition, stipulation, provision binding any person

acquiring any security to waive compliance with any

provision of this act or any rule or order hereunder is void.’

The inclusion of this wording in all three of these

securities acts demands that the purpose of these provisions not be

discounted or rendered irrelevant, even in a case with difficult facts

as before the Court today. The flaw in the Ninth Circuit’s

interpretation of the antiwaiver provisions would be more readily

apparent if the agreement between the parties had been to waive

any rights against fraudulent actions rather than to agree to a

choice of law provision. The need to preserve investor rights

against fraudulent actions is easily understood. Protection against

a voluntary choice of law provision generally, however, is less

obvious because it is dependent upon the substantive rights of the

laws of the selected jurisdiction.

Choice of law provisions are routinely used by contracting

parties and given full force and effect. To uphold the antiwaiver

provisions would have required the Ninth Circuit to void an

allegedly voluntary contractual provision between two parties and

to dismiss the application of a foreign law from a country with a

longer, more established history than the United States. However,

® 15 U.S.C. §78cc(aX 1997).

” UNIF. SEC ACT §410(a ) (1956), NASAA Reports (CCH) $4890 (July 1997).

none of these factors are relevant.

The clear language of the antiwaiver provisions is

irreconcilable with the ability of the courts to give effect to the

choice of law provision. Recently, Congress reviewed and revised

the federal securities laws in a comprehensive manner for the first

time since their enactment.* At that time, Congress recognized not

only the national nature of the U.S. securities markets, but the

internationalization of the securities markets generally.’ It should

be noted that Congress did not take that opportunity to void or

amend the antiwaiver provisions.

Il. THE COURTS WRONGFULLY ESTABLISHED

AN ALTERNATIVE STANDARD.

Despite the unambiguous language of the antiwaiver

provisions, in all five of the previous Lloyd’s of London cases

considered at the circuit court level, the courts applied similar

versions of an alternative test permitting the waiver of substantive

rights under the federal securities acts. The alternative test is the

result of the circuit courts’ wrongful extension of the decisions by

this Court in a series of pre-dispute arbitration cases, coupled with

a court-established public policy test that overrides the presumed

validity given to choice of law provisions.

* National Securities Markets Improvement Act of 1996, Pub. L. No. 104-290,

110 Stat. 3416 (1996).

° 104 CONG. REC. $12094 (daily ed. Oct. 1, 1996)(statement of Sen.

Dodd)(“The American capital markets are the envy of the world. No other Nation

enjoys the international reputation of our capital markets and it is necessary for

Congress periodically to review and modernize, where necessary, the laws that

make our markets and our financial services industry the world’s leader.”);

(statement of Sen. D’Amato)(“The National Securities Markets Improvement Act

of 1996 is a significant piece of legislation that will ensure that the U.S. securities

market remains the pre-eminent securities market in the world. . . . The biil will

make U.S. broker-dealers more competitive in the global markets. . . . This bill

will make the securities laws reflect the reality of today’s marketplace.”).

In a series of four cases relating to agreements requiring

the arbitration of securities disputes, this Court was forced to

evaluate the public policy issues surrounding the antiwaiver

provisions in the federal securities laws.’ The context for those

cases, however, was the dichotomy between mandatory arbitration

clauses, operating as forum selection clauses in the context of

“international” agreements, and the unyielding antiwaiver

provisions. Upon a careful analysis of those cases, it is apparent

that this Court issued its decisions after taking into careful

consideration a developing federal policy favoring arbitration

through the adoption of federal legislation, the creation of an

international forum for arbitration, and the continued application,

and protection of federal substantive rights."

The extension of the line of reasoning supporting the

narrow carve out relating to forum selection clauses under the

arbitration cases to a broad choice of law provision is misguided

and without even inferential support from Congress or the

international community. No federal policy favoring the

application of foreign substantive securities laws in transactions

with U.S. investors has developed. Rather, Congress, as well as

the SEC, continues to carefully evaluate the interrelationship of

U.S. and foreign securities laws and only very limited recognition

of foreign securities laws has become policy, as will be discussed

below. Moreover, only limited, generalized non-binding

international guidelines for securities transactions have been

° See Rodriquez de Quijas vy. Shearson/American Express, Inc., 490 U.S. 477

(1989); Shearson/American Express, Inc. v. McMahon, 482 U.S. 220 (1987);

Scherk v. Alberto-Culver Co., 417 U.S. 506 (1974); Wilko v. Swan, 346 U.S. 427

(1953), overruled by Rodriquez de Quijas, 490 U.S. 477 (1989).

'' See Darrell Hall, Note, No Way Out: An Argument Against Permitting Parties

to Opt Out of U.S. Securities Laws in International Transactions, 97 Colum. L.

Rev, 57 (1997).

ai i

promoted by voluntary international securities organizations, '*

Thus, any extension of the carve-out from the antiwaiver

provisions for forum selection clauses to include choice of law

Clauses is unwarranted and without Congressional guidance.

Ill. CONGRESS IS THE APPROPRIATE

BRANCH OF GOVERNMENT TO AMEND

FEDERAL STATUTES AND TO PERMIT

THE RECOGNITION OF FOREIGN

LAWS.

As previously mentioned, Congress recently reexamined

the federal securities acts and passed a bill containing revisions to

acknowledge changes in the marketplace.'> C ongress did not

amend or diminish the antiwaiver provisions.

Another manner in which Congress can facilitate the

recognition of foreign laws is through treaties. Congress endorsed

the North American Free Trade Agreement (“NAFTA”), as well as

authorizing the continued rounds of negotiations on the General

Agreement on Tariffs and Trade (“GATT”).'4

The general purpose of both NAFTA and GATT is to

eliminate discrimination of foreign persons and entities in certain

areas relating to cross-border trade and services by granting them

the same treatment as domestic persons and entities (“national

treatment”). The process by which the treaties are implemented

? See Report on the Implementation of IOSCO Resolutions, Int'l. Organ. of Sec.

Comm. (July 29, 1996); COSRA Principles, Council of Sec. Regul. of the

Americas (2d. ed 1996).

f Capital Markets Deregulation and Liberalization Act of 1995, supra p.5.

'* The North American Free Trade Agreement, H.R. Doc. No. 103-159, 103d

Cong. I" Sess. (1993): General Agreement on Tariffs and Trade, H.R. Doc. No.

103-316, 103d Cong. 2™ Sess. (1994),

10

permits broad deference to local laws.

ore

For example, under both NAFTA and GATT the federa

and state securities regulators identified various statutory

provisions, rules and regulations that were “reserved” from

compliance with the requirements of the treaties establishing equal

treatment across jurisdictional borders. The reservations were

identified because they reflected rights and obligations under the

U.S. securities laws that are prudential in nature and central to the

purpose of the federal and state securities acts. Essentially, the

federal and state regulators indicated to Congress, as well as the

other countries that are parties to the treaties, that the provisions

that were reserved are different than the standards of the other

countries, but crucial to U.S. securities markets.

The antiwaiver provisions should be given the same

deference. Congress should, if necessary, evaluate their continued

purpose and focus.

IV. THE FEDERAL AGENCY RESPONSIBLE

FOR FEDERAL SECURITIES LAWS HAS

RECOGNIZED, IN PART, ONLY ONE

OTHER COUNTRY’S LAWS AS SIMILAR

AND IT IS NOT THE LAW OF ENGLAND.

Section 19(a) of the 1933 Act grants the SEC the authority

“ _. from time to time to make, amend, and rescind such rules and

regulations governing the registration statements and prospectuses

for various classes of securities and issuers. . . ”'° Pursuant to this

authority, in February of 1985, the SEC issued a concept release to

solicit comment on a possible rulemaking initiative intended to

facilitate cross-border offerings of securities by specified issuers

'S 15 U.S.C. § 77s(a)(1997).

eT Se ee

1]

that met certain tests.'°

This concept, entitled the Multijurisdictional Disclosure

System, was undertaken by the SEC to “remove unnecessary

impediments to transnational capital formation without unduly

disadvantaging U.S. issuers in the U.S. markets, while ensuring

that those buying securities in the U.S. markets are afforded the

protections intended by the Securities Act and the Exchange

Act.”"’ The staff of the SEC thereafter began discussions with the

staffs of the Ontario and Quebec securities commissions.

Discussions with these Canadian provisions was stated as an

obvious starting point based upon Canada’s “mature capital

markets with a strong regulatory tradition.”

The states, through NASAA, formed a special task force to

work with the SEC and the provinces of Ontario and Quebec to

determine what accommodations would be appropriate at the state

level to facilitate use of the Multijurisdictional Disclosure system.

The rules permitting the Multijurisdictional Disclosure System

were adopted by the SEC in 1991.'? The NASAA members

adopted a resolution in September of 1989 supporting the new

effort.”

Subsequent to the adoption of the new rules, the SEC had

discussions with a few additional countries, but to no avail.

'° Facilitation of Multinational Securities Offerings, Securities Act Release No.

6568, Fed. Sec. L. Rep. (CCH)§83,743 (March 1985).

: Proposed Rules, Securities Act Release No. 6841, Fed. Sec. L. Rep.

(CCH)784,432, at p. 80,282 (Aug. 1989), revised proposal 484,701(Nov. 1990).

Id.

Adoption of Proposed Rules, Securities Act Release No. 6902, Fed. Sec. L.Rep.

(CCH) § 84,812 (July 1991).

~ NASAA Resolution Multijurisdictional Disclosure System Proposed by the

U.S. Securities and Exchange Commission, NASAA Reports (CCH) § 7030A

(Jan. 1993).

12

Similarities between those other countries securities laws were not

significant enough to warrant consideration of extending the

program.

The fact that the Multijuridsictional Disclosure System

was not extended to England bolsters the SEC’s argument in its

amicus brief in the Ninth Circuit that English laws are not the

substantive equivalent of U.S. securities laws as suggested by the

circuit courts.?! Moreover, it is clear from the SEC’s rationale for

pursuing the multijurisdictional system with the two specified

Canadian provinces that, although reducing unnecessary

impediments to capital formation efforts is important, such systems

cannot begin without assuring that U.S. investors are afforded the

protections intended by the federal acts.

CONCLUSION

The circuit courts have wrongfully applied a court

substituted standard for a Congressional mandate. The antiwaiver

provisions of both the federal and state securities laws were

included purposefully and without compromise for strong public

policy reasons that are even more important to the economic

welfare of the U.S. today. With more and more small and

unsophisticated investors relying upon the securities markets as

another method to save for their future retirement or family needs,

it is imperative to maintain the protections available under the U.

S. securities laws. In addition, with the increasing use of Internet

technology to communicate with persons on U.S. soil from

locations far away, U.S. investors need the assurance that their

rights under the U.S. securities laws that make the securities

markets so attractive in the first place will be upheld. If the

*! Brief of The Securities and Exchange Commission, Amicus Curiae, Richards v.

Lloyd's of London, Nos. 95-55747, 95-56467 (9" Cir. May 5, 1996).

13

absolute application of these provisions is no longer appropriate

due to the internationalization of the securities markets, Congress

and the states, (or if within the delegated authority to the federal

and state agencies that administer the securities laws, the SEC and

state securities regulators), should revise the antiwaiver provisions

accordingly. Until such time, the provisions stand and must be

upheld as unambiguously as drafted.

For the foregoing reasons, the Petition for Writ of

Certiorari should be granted.

Respectfully submitted,

KAREN M. O’BRIEN

General Counsel

North American Securities

Administrators Association, Inc.

10 G Street, N.E., Suite 710

Washington, D.C. 20002

(202) 737-0900

June 3, 1998