United States: In The Second Circuit, Uncertainty Remains Over The Triggering Event For The Statute Of Repose Applicable To Federal Securities Fraud Claims

Last Updated: October 9 2013
Article by Stephen M. Plotnick and Alexander G. Malyshev

Federal securities fraud claims brought under § 10(b) of the Securities Exchange Act and S.E.C. Rule 10b-5 must be brought not later than the earlier of two years after the discovery of the facts constituting the violation, or five years "after such violation."1 The two-year period is typically referred to as a statute of limitations, and the five-year period as a statute of repose. Although the law in the Second Circuit regarding accrual of the two-year statute of limitations is fairly well-settled, recent decisions have highlighted the absence of any clear guidance as to when the five-year statute of repose is triggered.

A Primer on the Statute of Repose

The distinction between statutes of limitations and repose is important, and the two are often confused. Statutes of limitation impact the remedies available to plaintiffs, and they are subject to equitable considerations (such as tolling or discovery rules). But statutes of repose impact the underlying right, and the clock on them will start ticking without interruption once the necessary triggering event occurs – regardless of whether a plaintiff knows or should know that she has a claim. Statutes of repose are subject only to legislatively created exceptions, and not to equitable considerations, and act to extinguish a plaintiff's claim after the passage of a fixed period of time. They create a substantive right in those protected by them to be free from liability after a defined period of time, and thus allow potential defendants to rest assured that a particular claim cannot be asserted against them once that time has passed.

The five-year statute of repose applicable to claims under § 10(b) and Rule 10b-5 is set forth in 28 U.S.C. § 1658(b). 28 U.S.C. § 1658(b) was not, however, enacted specifically for § 10(b) and Rule 10b-5 claims. It applies generally to federal civil causes of action involving claims of "fraud, deceit, manipulation, or contrivance in contravention of a regulatory requirement concerning the securities laws." Nevertheless, it is settled law that the time limitations set forth in the statute apply to § 10(b) and Rule 10b-5 claims, and that the five-year statute of repose is triggered by a "violation" of § 10(b) and Rule 10b-5. The question is what "violation" means, as it is not defined in 28 U.S.C. § 1658(b) itself.

When Does The Five-Year Statute of Repose Begin To Run for § 10(b) Claims?

Generally stated, § 10(b) and Rule 10b-5 make it unlawful to employ any device, scheme, or artifice to defraud, to make any untrue statement of a material fact, or to engage in any act which would operate as a fraud on any person, in connection with the purchase or sale of any security.2 In 2009, the Second Circuit, in Arnold v. KPMG LLP, an unpublished decision, held that the statute of repose for these claims "starts to run on the date the parties have committed themselves to complete the purchase or sale transaction."3 This holding differs from those of the Third and Seventh Circuits, both of which have held that the five-year statute of repose begins to run on the date of the defendant's alleged misrepresentation, even if the misrepresentation was made before the parties completed (or committed themselves to complete) the purchase or sale of securities.4 Nevertheless, Arnold appeared to settle the law of the Second Circuit,and was even followed in that regard by Judge Marrero of the Southern District of New York in 2010, in a case entitled Anwar v. Fairfield Greenwich Ltd.5

However, three recent decisions cast doubt on Arnold's efficacy. The first was issued by the Second Circuit itself in 2011, in City of Pontiac Gen. Employees' Retirement Sys. v. MBIA, Inc., a case in which the Second Circuit did not address this issue (or Arnold) directly, but rather remanded to the district court the question of whether the statute of repose "commences at the time of the defendant's misrepresentation or at the time the relevant securities were purchased."6

Earlier this year, Judge Sweet of the Southern District of New York expressly declined to follow Arnold and held, in Intessa Sanpaolo S.p.A. v. Credit Agricole Corp. and Invest. Bank, that the statute of repose begins to run on the date of the last alleged misrepresentation (which in that case occurred more than a month prior to the actual transaction).7 In so holding, Judge Sweet noted that Arnold was an unpublished decision that did not constitute binding precedent, and also distinguished it on the facts, holding that Arnold "addresses a scenario where the alleged misrepresentation was made after the purchase."8

Judge Sweet then refined this analysis a few months later, in Arco Capital Corp. Ltd. v. Deutsche Bank AG, a case in which the plaintiff alleged that the defendant's allegedly fraudulent conduct continued after the securities purchase transaction at issue.9 This time, Judge Sweet relied upon Arnold and, consistent with his view that Arnold applies only "where the alleged misrepresentation was made after the purchase," specifically held that the "violation" that triggers the repose period can take place before and up to the time when the purchase or sale of securities takes place, but not after. In other words, where post-purchase or sale violations are alleged, the repose period for those violations is triggered as of the date of the transaction.


Clearly, the issue of when the five-year statute of repose under § 10(b) and Rule 10b-5 is triggered remains unsettled in the Second Circuit, and is likely to remain so unless and until cases such as Intessa Sanpaolo and Arco Capital are appealed.10


1. 28 U.S.C. § 1658(b)

2. A private-plaintiff bringing a § 10(b) claim must show that she relied on the misrepresentation, and that the misrepresentation proximately caused her injuries, but these additional elements are not always deemed to be part of the "violation." See McCann v. Hy-Vee, Inc., 663 F.3d 926, 932 (7th Cir. 2011) ("there is no mention of reliance or injury in either section 10(b) of the 1934 Act or Rule 10b-5.") U.S. v. Vilar, -- F.3d --, 2013 WL 4608948 at * 19 (2d Cir. Aug. 30, 2013) ("the long-established law of our Circuit, and nearly every other circuit, is that, when the government (as opposed to a private plaintiff) brings a civil or criminal action under Section 10(b) and Rule 10b–5, it need only prove, in addition to scienter, materiality, . . . and not actual reliance.") (collecting cases)

3. Arnold v. KPMG LLP, 334 Fed.Appx. 349, 351 (2d Cir. 2009).

4. In re Exxon Mobil Corp. Sec. Lit., 500 F.3d 189, 200 (3d Cir. 2007); McCann v. Hy-Vee, Inc., 663 F.3d 926 at 932.

5. Anwar v. Fairfield Greenwich Ltd., 728 F. Supp. 2d 372, 387 (S.D.N.Y. 2010). In 2011 and 2012, federal district courts in California and Virginia also applied the Second Circuit's holding in Arnold. See Stichting Pensioenfonds ABP v. Countrywide Fin. Corp., 802 F. Supp. 2d 1125, 1134 (C.D. Cal. 2011);In re Countrywide Fin. Corp. Mtge.-Backed Sec. Litig., 2:11-ML-02265-MRP, 2012 WL 1097244 (C.D. Cal. Mar. 9, 2012); Carlucci v. Han, 886 F. Supp. 2d 497, 514 (E.D. Va. 2012).

6. City of Pontiac Gen. Employees' Retirement Sys. v MBIA, Inc., 637 F3d 169, 176 (2d Cir. 2011). A review of the docket in the case indicates that, following remand, the case settled and the district court never ruled on the statute of repose issue.

7. Intessa Sanpaolo S.p.A. v. Credit Agricole Corp. and Invest. Bank, 924 F. Supp. 2d 528, 537-38 (S.D.N.Y. 2013). Judge Kaplan of the Southern District of New York adopted a similar view in an unpublished 2012 decision, Boudinot v. Shrader, 09 Civ. 10163, 2012 WL 489215 at *4 (S.D.N.Y. Feb. 15, 2012), but did not address Arnold at all.

8. Id. at 536-37.

9. 12 Civ. 7270, 2013 WL 2467986, -- F. Supp. 2d --, at * 10 (S.D.N.Y. Jun. 6, 2013)

10. Judge Sweet recently dismissed the plaintiff's amended § 10(b) claim in Intessa Sanpaolo with prejudice, finding that the amended claim "failed to overcome the timeliness issues that proved fatal for the § 10(b) claims asserted in the first amended complaint." Intessa Sanpaolo S.p.A. v. Credit Agricole Corp. and Invest. Bank, 12 Civ. 2683, 2013 WL 4856199 at *6 (S.D.N.Y. Sept. 10, 2013). A motion to dismiss an amended complaint filed by the plaintiff in Arco Capital is currently pending.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

In association with
Related Topics
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions