Despite the forty-year history of applying state fraud or Blue Sky limitation periods to the implied private right of action under Rule 10b-5, this area of the law is in a state of upheaval. In 1987, the Third Circuit Court of Appeals held that, based upon recent Supreme Court cases, a limitation period should be drawn from the federal securities laws. The Third Circuit applied a limitation period that provides that certain express causes of action must be brought within one year of the date of discovery, but in no event more than three years after the date of the transaction to the 10b-5 claim of private litigants. No other courts of appeals have followed the Third Circuit's lead at this time, although many courts have expressed a desire for guidance from Congress or the Supreme Court regarding the appropriate limitation period. Although application of a federal limitation period is desirable, Congress's enactment of the Insider Trading and Securities Fraud Enforcement Act of 1988, which contains a five-year limitation period, makes it unclear whether one-year/three-year limitation provisions applied by the Third Circuit or the five-year limitation provision contained in the Act should be applied to private actions under Rule 10b-5.
Allison D. Garrett,
The Ramshackle Edifice: Limitations Periods for Private Actions Under Rule 10b-5,
Duq. L. Rev.
Available at: https://dsc.duq.edu/dlr/vol28/iss1/4