U.S. Supreme Court Rejects Argument That Claims Under § 16(b) Are Tolled Until a § 16(a) Disclosure Statement is Filed
The U.S. Supreme Court ruled today that the two-year time limit for bringing an action under § 16(b) of the Securities Exchange Act of 1934 is not tolled until after the filing of a § 16(a) disclosure statement. The case involves the right of an issuer (or, in this case, a shareholder bringing a derivative suit) to recover short swing profits obtained by a beneficial owner, director, or officer by reason of his relationship to the issuer under Exchange Act 16(b). Under §16(b), a corporation (or shareholder) may bring an action against corporate insiders who realize profits from the purchase and sale of the corporation’s securities within any 6-month period. The Act provides that such suits must be brought within "two years after the date such profit was realized." The Supreme Court vacated a January 2011 decision by the Ninth Circuit that a § 16(b) claim is subject to tolling and remanded the case to the District Court for further proceedings (including consideration of other equitable tolling principles).
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