Gabelli v. SEC: the Supreme Court's Statute of Limitations Ruling Puts Pressure on Federal Agencies to Investigate More Aggressively and Sue More Quickly

In a sweeping decision that could impact numerous enforcement actions by a number of federal agencies, the U.S. Supreme Court rejected the federal government’s argument that an agency should be entitled to the protection of the discovery rule in an enforcement action seeking a civil penalty for an alleged act of fraud.

The decision is Gabelli v. Securities and Exchange Commission, issued on February 27, 2013. The SEC had brought suit under the Investment Advisers Act against alleged participants in a putative fraud involving “market timing.” Because the SEC sought a civil penalty, the action was subject to 28 U.S.C. § 2462, which states that “an action, suit or proceeding for the enforcement of any civil fine ... shall not be entertained unless commenced within five years from the date when the claim first accrued ... .” This Section provides a general statute of limitations for any action seeking a civil penalty by a federal agency, unless a different limitations period applies under a particular statute. As the Supreme Court emphasized, Section 2462 “governs many penalty provisions throughout the U.S. Code.” Slip Op. at 2.

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Topics:  Discovery Rule, Fraud, Gabelli v SEC, Investment Advisers Act of 1940, SCOTUS, SEC, Statute of Limitations

Published In: Business Torts Updates, Civil Procedure Updates, Securities Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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