Thanks to a recent Third Circuit appellate court decision, we now have clearer guidance as to what standard the federal courts will apply when determining whether to dismiss an investor's claims because they are "stale and untimely."
In the case in question, a pension trust fund for operating engineers filed an action for violations of the Securities Act of 1933 related to mortgage-backed securities. The trial court initially dismissed the case because it wasn't filed within the one-year statute of limitations.
But the Third Circuit Court of Appeals reinstated the lawsuit after clarifying when the clock starts running on the statute of limitations: Instead of starting at the earliest opportunity that a plaintiff could have uncovered the basis for their claims, the Third Circuit ruled that the clock does not begin until the individual or organization either first discovers the violations, or when a "reasonably diligent" person would have discovered the facts underlying the claim.
This ruling allows those who think they have been victimized by investment fraud more time to investigate their claims, especially in situations in which further inquiry is necessary to gather sufficient information to determine that they have a claim worth pursuing.
With the question of availability and quality of the information now clearly key to determining when the clock begins to run on an investor's claims, it is critical for advisers, broker-dealers and investment firms to disclose all material facts without varnishing them to avoid misleading the client.
-- Brian Sommer, Meyer, Unkovic & Scott, firstname.lastname@example.org
Business workshop is a weekly feature from local experts offering tidbits on matters affecting business. To contribute, contact Business Editor Brian Hyslop at email@example.com.