For Some (Claims) It Is Too Late
Time-barred securities fraud claims once thought retroactively revived under the Sarbanes-Oxley Act ("SOXA") may very well have died again. A recent onslaught of court decisions suggests the federal judiciary is unwilling to apply longer statute of limitation periods to resurrect fraud claims originating before SOXA's enactment.
Not surprisingly, Plaintiff's bar was enamored with the passage of Section 804 of SOXA, which extended applicable statute of limitations periods for federal securities fraud claims from one year of discovering the facts constituting or giving rise to notice of the alleged violation, or three years after the violation, whichever came first, to two years from discovery or five years from the date of the violation. But celebration may have been premature.
Having now been litigated in federal district and appellate courts, multi-jurisdictional judicial opinion confirms federal securities fraud claims based upon violations that occurred prior to SOXA's effective date, July 30, 2002, are likely governed by pre-SOXA one and three limitations periods. Thus, a Section 10(b) fraud claim brought by a plaintiff in October 2003, but which is premised upon fraudulent acts that allegedly occurred between January through July 2000 (i.e. post-SOXA enactment but more than three years past the date of the alleged violations), will likely be dismissed as time-barred.
For businesses and corporate insiders looking over their shoulders, this perhaps means a little less strain on the neck. Indeed, practically speaking, whether in court or arbitration, parties defending against Section 10(b) fraud claims can now cite to such decisions as Aetna Life Ins. Co. v. Enterprise Mortgage Acceptance Co., LLC, 391 F.3d 404-406 (2d Cir. 2004) and Foss v. Bear Stearns & Co., Inc., 394 F.3d 540, 542 (7th Cir. 2005) to defend against and possibly defeat stale claims for securities fraud.
I am still trying to comprehend how a guilty broker can get off without as much as a slap on the wrist when blatant guilt is documented...all due to a "time limit". Who IS the industry protecting? According to what I have read it is "suppose" to be the investor. Well, the joke is on those of us who were not savy enough to discover the "fraud" because of the so called "statute of limitations" that is well hidden in the guidelines of the agencies.
I have been battling the "system" for over a year trying to get the "monitoring" groups to do something about stock certificates that were forged, signature guaranteed, and sold three years after the owner's death. If nothing more, the broker should be held accountable for his actions. Where is the justice in this industry for those of us who have little influence and less knowledge, but trust the advisor to do what is ethical on our behalf? After reading this article, I am more convincd than ever that the system does not work for everyone. IT'S BROKEN...but does anyone care? Apparently not.