Back in February 2013, a date that will not likely be enshrined in the halls of Securities and Exchange Commission (SEC) history, the United States Supreme Court shut down the SEC’s practice of trying to avoid the statute of limitations on its enforcement actions through reliance on the “discovery rule.”
Apparently, this came as a complete shock to the SEC. It reacted like Superman when confronted with Kryptonite: dropping into a crippled heap. But query how many tolling agreements were issued by the SEC that week? In case you were living in a cave at the time, the roar of applause you heard that day came from all of us in the securities defense bar who were cheering that decision. (As Mauro recalls, the anthem that day was “Whoomp, there it is.” The decision was great and long overdue. Probably 80 years overdue, and, in fact, so late that he was reminded of his nine-year-old’s favorite sarcastic line: “Seriously!”) The pressing question now is how far can the defense bar push the statute of limitations argument? Following Gabelli, does the statute of limitations apply to equitable relief often sought by the SEC? The answer, if you are a member of the defense bar, must be, yes, it does. Now let’s try to make the case.