Supreme Court in Gabelli: Clock Starts Ticking When Fraud Occurs, Not When It’s Discovered

The law requires the SEC to bring enforcement actions seeking penalties against individuals who violate the securities laws within five years.  The Supreme Court issued a unanimous ruling today that rejects the SEC’s argument that the five year clock begins to tick when they discover any alleged wrongdoing rather than the date on which the wrongdoing was committed.  The author previously has suggested that the application of the SEC’s proposed “fraud discovery rule” by a government agency charged with investigation and enforcement would be counter-productive and effectively would eliminate the five year statute of limitations.  To put this into context, the only federal crimes that have no statute of limitations are capital offenses that warrant the death penalty and certain terrorism, child abduction, and sex offenses.  If the SEC were allowed an indefinite period of time in which to bring enforcement actions, the fraud alleged in those cases would be on par with the most serious of federal crimes.  Today’s decision by the Supreme Court in Gabelli v. SEC rejects such an absurd result.

http://www.forbes.com/sites/insider/2013/02/27/supreme-court-in-gabelli-clock-starts-ticking-when-fraud-occurs-not-when-its-discovered/