Because the facts in a typical complaint by an investor against a stockbroker, investment advisor, or financial planner may give rise to several distinct legal theories, the analysis of time limits to bring a claim can be complex. Claims for securities fraud under Rule 10b-5 of the Securities Act of 1933 must be brought within two years of the time that the fraud should have been discovered, or within five years of the occurrence, whichever is shorter. Claims in California for common law fraud must be brought within three years of discovery. Claims for breach of fiduciary duty in California must be brought within four years of discovery, and so on.

Moreover, statutes of limitations for state securities fraud, common law fraud, breach of contract, and negligence may also be subject to discovery, delayed accrual, or tolling rules that can substantially extend an investor's time to bring a claim. Under such rules, claims can sometimes be successfully brought a decade or more after the first wrongful act occurred.

In addition to the time limits imposed under each claim, if an investor chooses arbitration or is required to arbitrate, the Code of Arbitration Procedures of FINRA (formerly NASD) provides that claims submitted more than six years after their occurrence are not eligible for arbitration.

Investors should be aware that the clock keeps running against the investor's claims until the formal complaint or claim is filed in court or before an arbitral tribunal such as the Financial Industry Regulatory Authority (formerly the National Association of Securities Dealers) or the American Arbitration Association. In particular, sending a complaint letter, filling out an online complaint form, filing an investor complaint with the Securities and Exchange Commission, filing an investor complaint with FINRA (formerly NASD), or pursuing mediation will not stop the clock. You must not delay filing your formal claim in arbitration (which is NOT the same as a complaint filed with an agency) or you could harm or lose your chance to recover.

The thing for an investor to remember about delay is that, while no amount of delay is safe, the investor should never conclude that his claims have become time-barred without first getting the advice of a qualified lawyer.

DISCLAIMER: The information at this site is provided as a public service. It is not intended as legal advice and should not be relied upon. You are advised to consult legal counsel before adopting any of the ideas or suggestions in this material, which may or may not be applicable in your jurisdiction or to your specific situation.
This page last updated on April 8, 2008
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