Circumstantial Evidence That Securities Transactions Were Implemented in New York Sufficient to Support Amendment of Complaint to Allege US “Domestic”

The World in U.S. Courts: Summer 2017 - Securities Law/Commodities Exchange Act (CEA)

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Wah v. HSBC North America Holdings Inc., US District Court for the Southern District of New York, June 7, 2017

The plaintiffs are individuals who claim to have been overcharged as a result of a conspiracy among the 17 global banks named as defendants to manipulate foreign exchange rates. In August 2016, the District Court in New York dismissed the plaintiffs’ antitrust and CEA claims, concluding the complaint alleged that the relevant transactions took place in Malaysia and Singapore, at a time when the plaintiffs resided in Malaysia, and therefore did not have a sufficient connection with the US to support claims under either statute. (The prior decision was discussed in the Summer-Fall Issue of The World in US Courts).

The plaintiffs attempted to amend their claim to escape the problems previously cited by the Court. Specifically, they added new allegations that they arranged the relevant transactions “by telephone directly [with] HSBC traders in the United States.” The plaintiffs believed that was the case because the phone calls were conducted very late at night in Singapore or Malaysia, but during trading hours in New York, and because of statements the HSBC traders allegedly made as to their trading day and the applicability of New York holidays.

The Court found the allegations of fact adequate to support a “reasonable inference” that the transactions were executed on a US exchange or with a US trading desk, facts that if proved might establish that the transactions were US “domestic,” and thus within the CEA. Especially in light of the rule that amendments to pleadings should be “liberally granted” in the absence of prejudice or other factors, the Court allowed the case to proceed on the new allegations.

[Editor’s note: the Wah case is also addressed in the Antitrust/FTAIA section of this report.]

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