U.S. Supreme Court rules that SEC must file enforcement actions within five years of an alleged fraud and is not entitled to discovery tolling.

The SEC filed a civil enforcement action against the officers of an investment advisor, seeking civil penalties under the Investment Advisors Act of 1940. The U.S. Supreme Court granted certiorari and ultimately upheld the lower court's determination that the penalty claim was time barred. The alleged "marketing timing" fraud occurred through August 2002, but the suit was not filed until April 2008. The Supreme Court concluded that the five-year statute of limitations would not be tolled in the context of the government bringing an action for civil penalties, unlike the typical, accepted situations involving defrauded customers seeking recompense. The Court noted that, unlike unsuspecting public customers, the SEC's very purpose was to root out certain fraud.

Case Law Alerts, 3rd Quarter 2013