## Facts

- Gabelli Funds, LLC served as investment adviser to the Gabelli Global Growth Fund; Marc J. Gabelli managed the fund’s portfolio and Bruce Alpert was the adviser’s COO.
- From 1999 to 2002, the SEC alleged that Gabelli and Alpert permitted a favored investor (Headstart) to engage in “market timing” in the fund under a special, undisclosed arrangement while restricting other investors.
- The SEC alleged the arrangement allowed Headstart to profit at other investors’ expense and constituted adviser fraud under the Investment Advisers Act of 1940.
- By August 7, 2002, the adviser ended market timing in the fund and Headstart withdrew.
- On April 24, 2008, the SEC filed a civil enforcement action seeking, among other relief, civil penalties subject to the five-year limitations period in 28 U.S.C. § 2462.

## Issues

1. For SEC civil enforcement actions seeking civil penalties, does the five-year limitations period in 28 U.S.C. § 2462 begin when the alleged fraud occurs or when it is discovered (or reasonably could have been discovered)?

## Decision

- The Supreme Court unanimously reversed the Second Circuit.
- The Court held that, for civil penalties under § 2462, the claim “first accrued” when the alleged violation occurred, not upon discovery.
- The case was remanded for further proceedings consistent with this limitations rule.

## Legal Principles

- Under 28 U.S.C. § 2462, an action for civil penalties must be commenced within five years from the date the claim first accrued, which ordinarily is when the cause of action is complete (the violation occurs).
- The discovery rule is a limited exception historically associated with protecting defrauded private victims seeking compensation; it is not presumed to apply to government actions for civil penalties.
- Civil penalties serve punitive and deterrent purposes, supporting a clear, violation-based accrual date that advances repose and reduces stale claims.
- Courts should not infer a discovery rule into § 2462 absent explicit statutory language; Congress’s use of discovery language in other statutes indicates it knows how to provide such a rule when intended.

## Conclusion

The Court held that the SEC cannot extend § 2462’s five-year limitations period for civil penalties by invoking a discovery rule; the period runs from the date of the alleged misconduct.


Gabelli v. SEC, 568 U.S. 442 (2013)