Tuesday, March 5, 2013

Advisors Beware - Expect More SEC Civil Actions

While the Supreme Court decision in Gabelli vs. SEC was of interest to securities lawyers, it may have a collateral impact for advisors, brokers and others who are possible targets of SEC enforcement actions.

The SEC has 5 years from the date that a fraud occurs to bring a proceeding. The SEC has argued in the courts that it should be given the benefit of what is known as the "discovery rule" which allows a civil plaintiff, such as a customer, to bring a fraud claim two years after the fraud was discovered. The decision, which is available at the Supreme Court's website, held that the time limit was 5 years from the fraud, no extensions in SEC cases.

The lower courts had been split on the issue, so the decision is welcome clarity for potential defendants who have been left in limbo while the Commission investigates. However, there is a new issue - the potential for a flood of SEC cases arising from the financial meltdown of 2008.

The statute of limitations for the SEC civil actions is starting to run now. Some potential defendants have undoubtedly avoided the penalties, as frauds that came to light in 2008 may have been committed in 2007. However, we can also expect the Commission to start filing cases in a flurry, to avoid the potential dismissal on statute of limitations grounds.

The attorneys associated with my firm include veteran litigators and former SEC enforcement attorneys. For a free consultation with one of our attorneys regarding any securities fraud proceeding, email us at astarita@beamlaw.com, or call 212-509-6544. We represent investors and financial professionals nationwide.


Post a Comment