Tomorrow the Supreme Court will hear argument in the case of Credit Suisse Securities v. Simmonds. The case arises out of a series of Initial Public Offerings (IPOs) during the tech bubble of the late 1990s. The plaintiff, Vanessa Simmonds, was an investor who owned tech stocks underwritten by Credit Suisse and other investment banks. Simmonds alleges that underwriters for these IPOs manipulated stock prices using short-swing transactions in violation of the insider trading laws.

The main issue before the Supreme Court will be when the insider trading law’s two-year time limit to bring suits begins to run: when the profit is realized by insiders or when the required public disclosures are filed.

Credit Suisse argues that actions must be brought within two years of the profits being realized and therefore Simmonds’ suit is time-barred. Simmonds argues that because insiders never filed the required disclosures when the profit was realized, the two-year limitations period never began to run. The district court dismissed the complaint on the grounds that the two-year limit had expired, but the Ninth Circuit agreed with Simmonds and reversed.

If the Supreme Court finds that the suit was time-barred, corporate insiders will be able to avoid liability for their illegal insider trading activity by violating the disclosure requirement.

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