The United States Supreme Court has just granted a writ of certiorari to decide whether the Securities and Exchange Commission (the “SEC”) has, in essence, a perpetual statute of limitations in cases arising out of alleged fraud. In Gabelli v. Securities and Exchange Commission, 11-1274 (cert. granted, Sept. 25, 2012), the Supreme Court will review whether 28 U.S.C. § 2462, the applicable statute of limitations, requires federal agencies to bring penalty actions “sounding in fraud” within five years of the date on which a violation occurred or the date on which the government discovered (or in the exercise of reasonable diligence should have discovered) the violation. The Court’s interpretation of Section 2462 is of great importance because this statute applies to the entire federal government in all civil penalty claims (except where Congress has specifically provided otherwise). If the Court rules in favor of the SEC, the government could delay indefinitely the filing of claims for civil penalties sounding in fraud by simply alleging that it had not discovered the basis for its claim until some time within the five-year limitations period.

The United States Supreme Court has just granted a writ of certiorari to decide whether a government agency has, in essence, a perpetual statute of limitations in cases arising out of alleged fraud. In Gabelli v. Securities and Exchange Commission, 11-1274 (cert. granted, Sept. 25, 2012), the Court agreed to review whether the statute of limitations, 28 U.S.C. § 2462, that governs federal actions for civil penalties in the absence of a more specific statute requires federal agencies to bring penalty actions “sounding in fraud” within five years of the date on which a violation occurred or the date on which the government discovered (or in the exercise of reasonable diligence should have discovered) the violation. Section 2462 provides that “except as otherwise provided by Act of Congress,” an action for a civil penalty “shall not be entertainedunless commenced within five years from the date when the claim first accrued.” While petitioners have maintained that a claim accrues when the underlying violation occurs, the Securities and Exchange Commission (the “SEC”) has insisted that a claim sounding in fraud accrues when the SEC discovers, or in the exercise of reasonable diligence should have discovered, the violation.