Things aren’t going well for you when you find yourself at the receiving end of sharp words from both Supreme Court Justices Antonin Scalia and Ruth Bader Ginsberg. Well, that’s where the SEC finds itself in its effort to read a five-year statute of limitations creatively.
Justices across the ideological spectrum suggested that the government was asking for too much in its reading of a statute that sets time limits on when regulatory agencies can file civil complaints.
The law says the actions must be filed within five years of the violation, but the government contends that in fraud cases, that means five years from the time an agency discovered, or should have discovered, a violation.
The case in question involves Gabelli Funds, which the SEC says improperly allowed a hedge fund to market-time its mutual funds. The only problem is, the SEC said it more than five years after the last questionable trade.
Sayeth Scalia: “What’s extraordinary is that the government has never asserted this, except in the 19th century, when it was rebuffed and repudiated its position.”
And from the other side of the High Court’s right-left divide, Ginsburg, who called five years a “generous” statute of limitations. Ginsburg’s ideological buddy, Justice Elena Kagan, added that having Eliot Spitzer embarrass you into doing something about market-timing probably isn’t a good enough reason to ignore an SoL.