The U.S. Supreme Court ruled Thursday that foreign investors cannot proceed with a U.S. lawsuit alleging that National Australia Bank Ltd. and a Florida subsidiary engaged in transnational securities fraud.

The case had been closely watched as a test on foreign shareholders' ability to bring class-action securities lawsuits against foreign companies in U.S. courts.

The Supreme Court, in an opinion by Justice Antonin Scalia, said the plaintiffs had no claim in U.S. courts because the securities lawsuit was brought by Australian shareholders who purchased shares of the Australian bank on an Australian exchange.

At issue were allegations that National Australia Bank's former U.S. mortgage unit, HomeSide Lending Inc. in Jacksonville, Fla., manipulated the value of its mortgage portfolio in order to meet overinflated earnings targets.

The plaintiff shareholders argued the lawsuit should proceed in the U.S. because the HomeSide executives who committed the alleged fraud were based in this country.

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