Annual Review of Federal Securities Regulation: Caselaw Developments 2010

William O. Fisher, University of Richmond


U.S. Supreme Court interprets two-year portion of Rule lOb-5 statute of limitations, addresses the extraterritorial reach of Rule lOb-5, limits "honest services" wire and mail fraud, considers standards applicable to claims that fees paid to mutual fund advisors violate § 36(b) of the Investment Company Act, and addresses the constitutionality of the statute creating the Public Company Accounting Oversight Board ('PCAOB"). The U.S. Supreme Court decided five cases with securities law implications in 2010. The Court held, first, that inquiry notice triggers the portion of the Rule lOb-5 statute of limitations that bars actions brought more than two years after discovery of the facts constituting the violation, that a plaintiff has inquiry notice when the facts would lead a reasonably diligent investor to investigate further, that a plaintiff thereafter has two years in which to bring the suit whether or not the plaintiff conducts an investigation, and that notice of the facts constituting the fraud include notice of facts that the defendants acted with scienter.2 The Court ruled, second, that Rule lOb-5 provides a private plaintiff with a cause of action only if the security that the plaintiff purchased is listed on an exchange in the United States or the purchase or sale on which the plaintiff bases the claim occurred in this country. 3 Addressing the mail and wire fraud statutes that often underlie government prosecutions of alleged securities malefactors, the