West v. Multibanco Comermex, S.A.: Application of the Securities Laws to Foreign Certificates of Deposit

The persistent debate concerning which investment instruments constitute "securities" for purposes of the Securities Act of 1933 and the Securities Exchange Act of 1934 is as old as the Securities Acts themselves. The Supreme Court has addressed the issue eight times without putting the debate to rest. In Marine Bank v.Weaver, the Court held that a certificate of deposit (CD) issued by a bank regulated under "the federal banking laws" is not a "security" within the meaning of the Securities Exchange Act of 1934. The Court of Appeals for the Ninth Circuit has twice, since Weaver, addressed the issue of whether CDs are "securities" within the purview of the Securities Act of 1933 in the different context of foreign banks issuing CDs in the United States to United States citizens. Relying on the Weaver analysis, the Ninth Circuit held in Wolf v. Banco Nacional de Mexico, S.A., that CDs issued by foreign banks are not securities. In West v. Multibanco Comermex, S.A., the Ninth Circuit again held that the foreign CDs issued to the plaintiff purchasers were not securities. This Note argues that while application of the Weaver rationale in Wolf was appropriate, the Ninth Circuit erred in relying on the Weaver rationale in West. The Weaver rationale is based upon an examination of the factual surroundings in order to determine the necessity for subjecting issuers of the CDs in question to securities laws when the CDs are abundantly protected under other laws. In West, the court determined that a factual inquiry into the actual enforcement of the foreign regulations was barred by the act of state doctrine. This Note argues that the West court erred by relying on the Weaver rationale when it was prevented from making the necessary factual inquiry. Application of Weaver in West was unwarranted and jeopardized important protections available under the Securities Act of 1933.