The Statute of Limitations for Securities Fraud FINRA Cases

We get several calls a day with clients wondering if it is too late to sue their broker or not. There is a statue of limitations for securities fraud cases that go before FINRA and we will detail it below for you:

FINRA Rule 12206 reads as follows:
12206. Time Limits
(a) Time Limitation on Submission of Claims

No claim shall be eligible for submission to arbitration under the Code where six years have elapsed from the occurrence or event giving rise to the claim. The panel will resolve any questions regarding the eligibility of a claim under this rule.” (Emphasis added)

It should be noted that the FINRA Code of Arbitration was updated in 2007, with FINRA revising the language of the FINRA arbitration code to make it simpler and easier for people to understand. FINRA also addressed any rule clarifications it deemed necessary at that time. Interestingly, and notwithstanding the fact that broker-dealers have been attempting to make this same argument that the purchase date is the triggering date for the six year bar on FINRA claims, FINRA elected not to revise this particular rule, keeping the original language of the old. It seems evident that had FINRA intended for the occurrence of event giving rise to the claim to be the date of purchase, then this is exactly what the new language of the rule would have been.

Moreover, as discussed below, numerous courts have held that the “occurrence or event” triggering the six-year eligibility period is not the transaction itself.

The six year time limit as set forth by FINRA does not begin to run from the date of sale. If this were in fact the law all an investment advisor would have to do to escape liability would be to hide the fraud for 6 years. Clearly that was not the intent of FINRA when they carefully chose the language to be included in FINRA Rule 12206 which reads, “No claim shall be eligible for submission to arbitration under the Code where six years have elapsed from the occurrence or event giving rise to the claim.” No investor knows at the date of sale what the true make up of their investment is until an event or occurrence takes place that gives them notice that they have a cause of action. The sale is not the event; otherwise FINRA would have chosen to include the language in 12206 six years elapsed from the date of sale not from the occurrence or event giving rise to the claim.

If your time is running out it is good to at least call a FINRA lawyer today for a free consultation. To call Soreide Law Group please call 1-888-760-6552 for a free consultation regarding your rights.