September 1, 2004

SEC Weighs In On The Revival Of Time-Barred Claims

The Sarbanes-Oxley Act of 2002 extends the statute of limitations for federal securities fraud to the earlier of two years after the discovery of the facts constituting the violation or five years after such violation. Although the legislation clearly provides that it "shall apply to all proceedings addressed by this section that are commenced on or after the date of enactment of this Act [July 30, 2002]," left unresolved is whether Congress intended to revive claims that had already expired under the earlier one year/three years statute of limitations. District courts are split (although the trend appears to be against reviving time-barred claims) and the issue is currently before the U.S. Court of Appeals for the 11th Circuit.

In the midst of this debate, the Wall Street Journal reports (subscrip. req'd) that the SEC has filed an amicus brief in the U.S. Court of Appeals for the Second Circuit arguing that Sarbanes-Oxley did revive time-barred claims. The SEC's primary argument is that Congress was not required to specifically express its "retroactive intent" and the "natural meaning of the statutory language" supports its position. The underlying case, AIG Asian Infrastructure Fund, L.P. v. Chase Manhattan Asia Limited, et al., alleges Rule 10b-5 violations based on a 1998 purchase of securities.

Addition: In related news, the Legal Intelligencer has an article (via law.com - free regist. req'd) today on a district court decision (from the E.D. of Pa.) that rejects the revival of time-barred claims.

Posted by Lyle Roberts at September 1, 2004 7:38 PM | TrackBack
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