In a recent unanimous decision, the United States Supreme Court overturned the Second Circuit Court of Appeals, holding that the federal statute of limitations starts running upon the occurrence of an alleged fraud, rather than the discovery of such fraud by the SEC or other regulator. In 2008, the SEC sought civil penalties from petitioner, whom it alleged engaged in investment advisor fraud from 1999 until 2002. The federal statute of limitations (28 U.S.C. § 2462) prohibits the federal government from bringing an enforcement action after five years from the date the claim first "accrued." The SEC argued that the "discovery rule," which was developed in the 18th century to preserve the rights of unknowing victims of concealed fraud, applies to government enforcement actions for civil penalties. The Court rejected this claim, noting that the most natural reading of the statute is that such a claim "accrues," i.e., comes into existence, upon the occurrence of a fraudulent act. The Court distinguished between a defrauded civil plaintiff and the SEC, whose very purpose is to root out such fraud and which has been empowered to do so with a number of legal tools. Additionally, the Court noted practical impediments to the adoption of the discovery rule in connection with government actions for civil penalties, stating that if such rule was adopted, repose would hinge on a difficult, factual determination of "what the Government knew, when it knew it, and when it should have known it."

Gabelli v. Securities and Exchange Commission, 133 S.Ct. 1216 (February 27, 2013).