In an important development for investors defrauded by their
financial advisers, the Illinois General Assembly has passed an amendment to
the Illinois Securities Law eliminating the five-year statute of repose. The legislature’s action is an important
restriction on the broad reach of the statute’s period of limitations.
The statute includes anti-fraud provisions that make it a
violation for any person to “engage in any transaction, practice or course of
business in connection with the sale or purchase of securities which works or
tends to work a fraud or deceit upon the purchaser or seller thereof.” 815 ILCS 5/12(F). The Act also makes it illegal to “employ any
device, scheme or artifice to defraud in connection with the sale or purchase
of any security, directly or indirectly.”
815 ILCS 5/12(I). Investors have a private right of action under
the Act, subject to a two-tier limitations period. The Act has a three-year statute of
limitation that begins to run from the date a plaintiff has actual knowledge of
the alleged violation or has notice of facts which in the exercise of
reasonable diligence would lead to actual knowledge. 815 ILCS
5/13(D)(1)-(2). Until now, the Act also
provided a statute of repose of five years from the date of sale of the
security at issue, beyond which no lawsuit can be filed. 815 ILCS 5/13(D)(2).
The General Assembly’s decision to abolish the statute of
repose removes an artificial impediment to a defrauded investor’s ability to
seek reimbursement for wrongfully caused losses. Before
the amendment, an investor who had no knowledge that he or she was defrauded
within five years of the sale of securities was absolutely precluded from
pursuing any claims. That was true even
if the investor who filed a lawsuit did not invoke the Illinois Securities Law. Courts have interpreted the statute broadly, applying
the limitations provisions to an investor’s common law causes of action for
breach of fiduciary duty, fraud and negligent misrepresentation as long as the
investor’s claims “are reliant upon. . .matters for which relief is granted” by
the Act.
With the new amendment, fraudsters will no longer escape
liability merely because they successfully deceive investors for a long enough
period of time. If you believe you have claim against your financial advisor, call Block & Landsman for a confidential and free consultation.
