The Supreme Court will hear arguments next week in a case that will determine how much time federal securities regulators have to impose civil fraud penalties, the Washington Post reported yesterday. In Gabelli v. SEC, two Gabelli Funds officials argue that the Securities and Exchange Commission waited too long to bring a civil case accusing them of authorizing an improper trading technique at their firm. The argument raises a question often debated in legal circles: When does the clock start ticking on civil fraud cases? Some courts have ruled that the SEC can only obtain civil penalties for fraud within five years of the violation taking place, as a lower court did in the Gabelli case. But in August, the U.S. Court of Appeals for the 2nd Circuit decided that time runs out five years after the SEC discovers, or reasonably should have discovered, the alleged fraud.
