On Friday, January 13, the Supreme Court granted certiorari to resolve a Circuit split on the extent to which SEC enforcement actions are restricted by the five-year statute of limitations in 28 U.S.C. § 2462.
Section 2462 sets a five-year limitations period “for the enforcement of any civil fine, penalty, or forfeiture.” The Supreme Court has held those limitations accrue when the violation occurs and the SEC does not benefit from a “discovery rule.” Gabelli v. SEC, 133 S. Ct. 1216, 1220 (2013).
But there’s disagreement over whether it applies to the commonly-sought disgorgement and injunctive relief (whether suspensions, bars, or mere obey-the-law injunctions).
The D.C., 9th, and 10th Circuits have held that obey-the-law injunctions and disgorgement are remedial, not penalties, and thus are not subject to § 2462. SEC v. Kokesh, No. 15-2087 (10th Cir. August 23, 2016)(here); Riordan v. SEC, 627 F. 3d 1230 (D.C. Cir. 2010)(obey the law injunction); SEC v. Tambone, 550 F. 3d 106 (1st Cir. 2008); SEC v. Rind, 991 F.2d 1486 (9th Cir. 1993)
But the D.C. Circuit has held injunctive suspension or bars for past behavior are “punishment” subject to those limitations. Johnson v. SEC, 87 F. 3d 484 (D.C. Cir. 1996) (bars and suspension were punishment for past behavior, so not equitable remedies). The issue also is pending in the D.C. Circuit in Timbervest, LLC v. SEC, No. 15-1416 (D.C. Cir. June 24, 2016).
And the 11th Circuit has held that disgorgement is a “forfeiture” also subject to § 2462. SEC v. Graham, 823 F. 3d 1357 (11th Cir. 2016). That Circuit also holds “obey-the-law” injunctions unenforceable.
The Court granted cert to review Kokesh.