How does the statute of limitations begin to run in a securities fraud case?

Although state law governs the length of the limitations period, federal law controls the point at which the statute commences to run. SEC v. Seaboard Corp., 677 F.2d 1301, 1309 (9th Cir.1982). Normally, a statute of limitations period begins to run when an injury occurs, which is usually equivalent to when the cause of action accrues. In the context of fraud, however, the injury and accrual of the cause of action may occur at a time distinct and separate from the commencement of the statute of limitations period.

In fraud cases, a cause of action is generally said to accrue when a defendant commits the last overt injurious act. Campbell v. Upjohn Co., 676 F.2d 1122, 1126 (6th Cir.1982) (cause of action for fraud accrued the moment plaintiff signed a contract nullifying defendant's alleged promise; plaintiff need not wait to see if defendant paid the promised amounts). In a securities fraud case, the cognizable injury occurs at the time an investor enters, or if he currently owns stock, decides to forego entering a transaction as a result of material misrepresentations. This constitutes the injury giving rise to a cause of action, even if an actual monetary loss is not sustained until later. However, the statute of limitations is not triggered until the defrauded individual has actual or inquiry notice that a fraudulent misrepresentation has been made. Seaboard, 677 F.2d at 1309 (statute of limitations does not begin to run until plaintiff discovered or could have discovered the fraud through the exercise of reasonable diligence).