SEC’s Possible Reality: All Enforcement Actions Filed Within Five Years

October 7, 2014  |  New York Law Journal

Enforcement actions seeking penalties long have been subject to the five-year statute of limitations set forth in 28 U.S.C. §2462. For years, the SEC has sought not to be tied down by a strict five-year limitation by arguing that the clock does not start to run until the alleged fraud is discovered by the agency—a position flatly rejected by the U.S. Supreme Court last year. The last arrow in the SEC’s quiver to avoid the five-year statute has been its argument that when it seeks so-called “equitable” remedies, like injunctions and disgorgement, the limitations period contained in Section 2462 is inapplicable. This final effort to avoid statutory time constraints also may be doomed. SEC v. Graham, a recent decision from the Southern District of Florida, if upheld, would require the SEC timely to investigate and file all enforcement actions regardless of the remedy sought. In this article, we discuss this case and other recent cases, and evaluate the role a change in §2462 would play in future cases.

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