## Facts

- The SEC alleged Guy Gentile, the owner of a broker-dealer, participated in two penny-stock market-manipulation schemes in 2007–2008.
- The alleged schemes involved promoting penny stocks and placing trades and orders to create a false appearance of liquidity, market depth, and demand.
- In March 2016, the SEC brought a civil enforcement action seeking (1) an injunction against future violations of specified securities laws and (2) a penny-stock bar prohibiting participation in the penny-stock industry.
- The SEC’s appeal concerned only the timeliness of these injunctive remedies, not civil penalties or disgorgement.
- Gentile moved to dismiss, arguing the requested injunctions were “penalties” subject to the five-year limitations period in 28 U.S.C. § 2462.

## Issues

1. Whether 28 U.S.C. § 2462’s five-year limitations period for actions seeking a “civil fine, penalty, or forfeiture” applies to SEC actions seeking an obey-the-law injunction and a penny-stock bar.
2. Whether, and under what conditions, 15 U.S.C. § 78u(d) authorizes the requested injunctions as nonpunitive, forward-looking equitable relief.

## Decision

- The Third Circuit vacated the district court’s dismissal and remanded.
- The court held that § 78u(d) does not permit punitive injunctions; therefore, injunctions that are permitted under § 78u(d) are not “penalties” within § 2462.
- The court rejected treating SEC injunctions as categorically time-barred merely because they may deter; Kokesh’s holding that disgorgement is a “penalty” did not control injunctions.
- The district court must determine on remand whether the specific injunctions sought satisfy traditional equitable requirements (including a reasonable likelihood of future violations) and are properly preventive rather than punitive.

## Legal Principles

- 28 U.S.C. § 2462 applies to actions seeking a “civil fine, penalty, or forfeiture,” but not to relief that is equitable and nonpunitive.
- Under 15 U.S.C. § 78u(d), SEC injunctions must accord with traditional equitable principles and cannot be imposed as punishment for past conduct.
- Deterrent effect alone does not convert equitable relief into a “penalty” for § 2462 purposes.
- The passage of time between alleged misconduct and suit is relevant to whether forward-looking injunctive relief is warranted, but it is not itself a limitations bar if the relief sought is nonpunitive.

## Conclusion

The Third Circuit held that § 2462 does not time-bar SEC injunctions that are properly authorized as nonpunitive equitable relief under § 78u(d), vacated the dismissal, and remanded for a fact-specific determination whether the requested obey-the-law injunction and penny-stock bar are genuinely preventive and justified by traditional equitable factors.


SEC v. Gentile, 939 F.3d 549 (3d Cir. 2019)