This cases states that Gabelliet and Alpert aided and abetted investment adviser fraud from 1999 until 2002. Petitioners moved to dismiss the case because it was reaching it's five year statute of limitations. They pointed out that the complaint alleged illegal activity up until August 2002 but was not filed until April 2008. The Second Circuit reversed the decision to be dismissed because they applied the "discovery rule" meaning that the statute of limitations did not begin to run until the SEC dis- covered or reasonably could have discovered the fraud. The SEC’s complaint alleged that Alpert and Gabelli permitted Headstart to engage in market timing in ex- change for Headstart’s investment in a hedge fund run by Gabelli.
The Supreme Court's final ruling was that they over ruled the Second Circuits decision to reverse the movement to dismiss the case. The Supreme Court said that the SEC is not allowed to use the "discovery rule" to toll the operative statute of limitations. The Court rejected the SEC's argument that the discovery rule should apply to toll the statute of limitations until the Government has discovered its cause of action. The Gabelli decision will influence enforcement decisions and actions of many different federal agencies. Among other things, the SEC and other agencies will likely seek tolling agreements from parties under investigation much earlier in investigations in order to preserve their ability to investigate suspected misconduct.