Supreme Court Limits SEC Penalties on Aging Fraud Cases

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The Supreme Court on Wednesday limited the authority of the federal government's top securities regulator to seek civil penalties over conduct that occurred more than five years before investigators took action.

On a unanimous vote, the court decided that the five-year clock for the government to act on fraud begins to tick when the fraud occurs, not when it is discovered.

The case is a win for mutual fund manager Marc Gabelli and colleague Bruce Alpert, whom the Securities and Exchange Commission claimed allowed a firm now known as Headstart Advisers Ltd to conduct hundreds of "market-timing" trades, which involve rapid trading to exploit market or price inefficiencies.