The Supreme Court Imposes a Strict Five Year Statute of Limitations on SEC Penalty Cases

In Gabelli v. Securities and Exchange Commission (, the Supreme Court unanimously applied a hard five year statute of limitations to the SEC's ability to impose civil penalties on defendants.  The SEC tried to apply the so-called "discovery rule" to toll the limitations period until the wrongdoing was discovered.  The SEC contended that the discovery rule should be applied in cases of fraud.  The Supreme Court rejected that view, holding that the limitations runs from the date of the act constituting the wrongdoing without exception or extension.  This result is beneficial to defendants because it precludes the SEC from seeking to impose civil penalties to any conduct occurring more than five years before the SEC files suit.