The Ninth Circuit agreed today with 10 of its sister circuits on the question of whether mere "inquiry notice" of possible fraud starts the statute of limitations period running for purposes of a securities fraud claim: It does. Betz v. Trainer Wortham & Co., Inc., No. 05-15704 (9th Cir. May 11, 2007).
But the court also found a silver lining for plaintiffs in the tougher scienter (intent to defraud) standard that they face under the Private Securities Litigation Reform Act. Before inquiry notice arises, the court held, the plaintiff must have facts suggesting likely intent to fraud. Not even learning about a "serious problem" with the plaintiff’s investment account would have triggered sufficient suspicion of the broker’s intent to defraud, the court concluded, reversing summary judgment against the plaintiff Betz.