On a timed state-securities quiz, the scenario below appears. Focus on what changes once the scenario is viewed through state law. Under the USA, what is the statute of limitations for a civil action brought by a buyer against a seller who sold securities through fraud?

A3 years from the date of sale or 2 years from discovery of the violation, whichever comes first✓ Correct answer
B5 years from the date of sale regardless of when the fraud was discovered
C1 year from the date of sale or 6 months from discovery, whichever comes first
D2 years from the date of sale or 1 year from discovery, whichever comes first

Explanation

Why A — 3 years from the date of sale or 2 years from discovery of the violation, whichever comes first

Under USA Section 410(e), no action may be maintained to enforce liability under the civil liability provisions unless brought within 3 years after the sale or 2 years after discovery of the violation, whichever expires first. This dual limitation protects both buyers and sellers. State-law analysis leads to the same conclusion despite the alternate scenario.

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