SEC v. Gabelli reversed on discovery rule grounds.

The U.S. Supreme Court rejected the SEC'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. In Gabelli, the action had been filed nearly six years after the alleged fraud had occurred. The SEC argued the discovery rule, under which the claim would not be deemed to have accrued until the alleged fraud could have been discovered in the exercise of reasonable diligence. The SEC argued that the agency should receive the benefit of this rule to the same extent as private parties. The Supreme Court rejected this argument because the SEC was "[n]ot a defrauded victim seeking recompense" but, rather, an agency "bringing an enforcement action for civil penalties."

Case Law Alerts - 2nd Quarter 2013