WASHINGTON (Reuters) - The U.S. Supreme Court agreed on Tuesday to consider an appeal by fund manager Marc Gabelli, who accused the U.S. Securities and Exchange Commission of waiting too long to bring a civil case accusing him of letting a client engage in so-called market timing.
The SEC had accused Gabelli, a former portfolio manager at Gabelli Funds LLC, and Bruce Alpert, a former chief operating officer for the firm, of letting Britain's Folkes Asset Management, now known as Headstart Advisers Ltd, secretly conduct hundreds of market-timing trades in the Gabelli Global Growth Fund between 1999 and 2002.
The SEC, however, did not sue until April 2008, when Gabelli Funds agreed to pay $16 million to settle related charges.
Gabelli and Alpert said this was too late, given that the statute of limitations was five years and the last market-timing trade had taken place in August 2002, nearly six years earlier.
But in an opinion by U.S. District Judge Jed Rakoff, the 2nd U.S. Circuit Court of Appeals said Gabelli and Alpert did not show that a reasonably diligent plaintiff would have uncovered the fraud before September 2003, when then-New York Attorney General Eliot Spitzer publicly unmasked the practice. Thus, the appeals court let the SEC lawsuit seeking civil penalties go forward.
In their Supreme Court appeal, Gabelli and Alpert said the 2nd Circuit decision conflicted with decisions of at least four other circuit courts that said the five-year clock begins ticking when a claim "accrues" - in this case, they said, in 2002.
Marc Gabelli is a son of prominent investor Mario Gabelli.
A decision is expected in the court's upcoming term, which ends next June.
The case is Gabelli et al v. SEC, U.S. Supreme Court, No. 11-1274.
(Reporting by Terry Baynes and Jonathan Stempel; Editing by Howard Goller, Doina Chiacu and Lisa Von Ahn)