## Facts

- Patricia A. Johnson managed PaineWebber’s Beverly Hills office and supervised registered representative David Zetterstrom from 1984 to 1991.
- During 1987–1988, Zetterstrom stole over $114,000 from customers by issuing unauthorized checks against their accounts.
- Johnson did not know of the thefts while they occurred, but she received other customer complaints about Zetterstrom’s account handling, placed him on probation, and terminated him on June 10, 1988.
- After his termination, Johnson discovered the thefts; PaineWebber initiated an internal audit and notified the SEC, which opened an investigation in June 1988.
- On October 26, 1993—more than five years after the SEC began investigating—the SEC instituted an administrative proceeding alleging Johnson failed reasonably to supervise Zetterstrom under Exchange Act § 15(b)(4)(E).
- The SEC sought and ultimately imposed public censure and a six-month suspension from supervisory roles in the securities industry.

## Issues

1. Whether 28 U.S.C. § 2462’s five-year limitations period applies to SEC administrative proceedings.
2. Whether public censure and a fixed-term six-month supervisory suspension constitute a “civil fine, penalty, or forfeiture” under § 2462.
3. When the SEC’s supervisory-failure claim accrued for purposes of § 2462.

## Decision

- The court granted Johnson’s petition for review and vacated the SEC’s order.
- The court held § 2462 applies to administrative proceedings as well as court actions.
- The court held the censure and six-month supervisory suspension functioned as a “penalty” under § 2462.
- The court concluded the claim accrued, at the latest, when the SEC had knowledge sufficient to investigate (June 1988), and the October 1993 proceeding was untimely.

## Legal Principles

- Section 2462 applies to an “action, suit or proceeding,” and that language includes administrative enforcement proceedings absent a contrary statutory provision.
- A sanction is a “penalty” under § 2462 when it is imposed for punishment and deterrence rather than to compensate harm or directly remedy an ongoing condition.
- Public censure and a fixed-duration industry suspension may be treated as punitive where they are backward-looking, stigmatizing, and not tailored to present risk reduction or conditional remediation.
- For § 2462 purposes, accrual occurs when the violation is complete and the agency has sufficient basis to proceed; absent a continuing-violation theory, the limitations period runs from that point.

## Conclusion

The D.C. Circuit held that the SEC must bring administrative enforcement proceedings seeking punitive professional discipline within five years of accrual under 28 U.S.C. § 2462, and it vacated the SEC’s late-filed censure and six-month supervisory suspension of Johnson.


Johnson v. SEC, 87 F.3d 484 (D.C. Cir. 1996)