Last week, the Securities and Exchange Commission filed an amicus curiae supporting an extension of the statute of limitations for securities fraud.
The phrase amicus curiae, which is Latin for "friend of the court," refers to a legal brief that is submitted to a court to present a particular point of view in a case. The briefs are typically submitted by entities that are not party to the case, but that have some interest in the outcome. In the SEC's case, amicus briefs are often submitted if the outcome is likely to have a "substantial precedential impact," limit the Commission's jurisdiction, or cause a conflict between the federal securities laws and other federal or state law.
Prezioso
In a recent speech on the Commission's amicus program, SEC General Counsel Giovanni Prezioso stated that his office has made 22 amicus submissions in the past 18 months, and that future briefs were "likely to include the obligations of accountants and auditors, fiduciary responsibilities of mutual fund advisers, the quality of public company financial disclosure, and the responsibilities of directors and officers" (see box at right for complete speech).
In the latest case, the SEC stated that it has an interest in ensuring that the ability of investors to bring private actions is not "improperly" restricted.
Barred Or Timely?
The Commission's latest brief, submitted by Prezioso, relates to Section 804 of Sarbanes-Oxley, which lengthened the statute of limitations for the filing of fraud actions by investors. Since SOX was passed in July 2002, investors can file lawsuits up to two years after discovering fraudulent behavior and five years after the violation occurred.
The previous limits were one year and three years, respectively.
Prezioso filed the brief with U.S. Court of Appeals for the Second Circuit, "urging this court to hold that the amended statute of limitations permits investors to bring claims that are timely under the new limitations provision, regardless of whether those
investors’ claims had become barred prior to the enactment of the amendment under the former limitations period."
The brief was submitted regarding a case filed by mutual fund group AIG Asian Infrastructure Fund against Chase Manhattan Asia and J.P. Morgan Partners.
In the case, AIG commenced an action that became barred under the then-prevailing three-year statute of
limitations. The defendants argued that AIG's claim was not revived by the new limitations period in Section 804 of Sarbanes-Oxley because the claim had already been barred before the new limitations period was enacted. "It is undisputed that if the pre-Sarbanes-Oxley limitation period applies, the action is barred," noted the Prezioso brief, "and if Section 804 applies, the action is timely."
According to the brief, the district court dismissed the action as barred under the shorter pre-Sarbanes-Oxley limitations period, even though Section 804 states that it applies to all proceedings “commenced
on or after the date of enactment.”
The court argued that Congress did not explicitly state that Section 804 could be applied retroactively. In addition, the court noted that, because retroactive application would renew securities fraud claims that had expired and therefore increase liability for conduct based on those claims, it had an "impermissible retroactive effect."
"The Commission disagrees with the district court’s decision that Section 804 does not revive barred claims," Prezioso's brief noted.
The complete brief can be downloaded from the box above, right.
No comments yet