The SEC May Be Getting A Longer Stick

Two years ago, the United States Supreme Court stated in an opinion that the five-year statute of limitations for the SEC to seek civil monetary sanctions began from the date of the fraudulent act, as opposed to when the SEC discovered the fraudulent act. In doing so, the Court rejected the discovery rule.

The discovery rule extends the statute of limitations because it provides that the statute does not begin to run until the party bringing the claim discovers the wrongdoing. For example, if the fraud happened 10 years ago, but was discovered yesterday, the SEC would have had five years from yesterday to bring a claim against the fraudster. Applying the Supreme Court's rule noted above, the SEC would be out of luck to bring a claim for civil penalties.