Deadlines for Securities Claims in Texas and Federal Court

Why there is more than one deadline

A single bad investment usually supports several legal claims, and each has its own clock with its own start date. The Texas Securities Act, federal Rule 10b-5, the federal Securities Act and Texas common law all count differently. Some clocks start at the sale, some at discovery, and some have a hard outer limit that no discovery rule can move. The practical consequence is that a case can be alive under one theory and dead under another, and the choice of theory sometimes follows the calendar rather than the merits.

The deadlines side by side

Texas Securities Act: three years from discovery, five from the sale

Government Code section 4008.062 sets two different schemes. For a sale by means of an untrue statement or misleading omission, suit must be filed within three years after the buyer discovered the untruth or omission, or after the date discovery should have been made with reasonable diligence, and in no event more than five years after the date of the sale. For a registration violation, meaning an unregistered security or an unregistered dealer or agent, there is no discovery rule at all: three years from the sale, period. The claims themselves are explained in the guide to the Texas Securities Act.

The rescission offer rule changes the arithmetic. If the seller makes a written rescission offer that meets every requirement of section 4008.058 before suit, the buyer loses the Act claim unless the buyer rejects in writing within 30 days and expressly reserves the right to sue, and then has one year from the rejection to file. A seller who learns of a problem can use that mechanism to shorten the exposure deliberately.

Federal Rule 10b-5: two years and five years

Since 2002, 28 U.S.C. § 1658(b) has governed private claims involving fraud, deceit, manipulation or contrivance under the securities laws. Suit must be brought within the earlier of two years after discovery of the facts constituting the violation, or five years after the violation. The Supreme Court has read "discovery" to include the facts a reasonably diligent plaintiff would have discovered, including facts going to the defendant's state of mind, so the two years can start before the investor actually connects the dots. The five-year period is a statute of repose: it runs from the misstatement or the purchase, not from discovery, and it is not subject to equitable tolling. The elements and pleading rules are in the Rule 10b-5 guide.

Securities Act sections 11 and 12: one year and three years

Section 13 of the Securities Act, 15 U.S.C. § 77m, gives one year from discovery of the untrue statement or omission for claims under section 11 (false registration statement) and section 12(a)(2) (false public prospectus or oral communication), and one year from the violation for section 12(a)(1) (sale of an unregistered security in a public offering). The outer limit is three years from the public offering for sections 11 and 12(a)(1), and three years from the sale for section 12(a)(2). These claims apply to public offerings, so they matter to purchasers in registered deals and to companies and underwriters who ran them, more than to private-placement investors.

Texas common law: four years, with a discovery rule

Texas Civil Practice and Remedies Code section 16.004 gives four years for fraud and for breach of fiduciary duty, and the same four years apply to statutory fraud under Business and Commerce Code section 27.01. Texas applies the discovery rule to fraud claims, so the period begins when the plaintiff knew or should have known of the wrongful act and injury, and fraudulent concealment by the defendant can delay it further. Negligent misrepresentation and negligence claims generally carry a two-year period. Texas has no fixed statute of repose for these claims, which is why a Texas fraud claim is often the last theory still alive when the federal five years and the Texas Securities Act five years have both run. The detail is in the guide on fraud and fiduciary deadlines.

When the clock starts, and what stops it

Three events matter: the sale (the start of every repose period and of the Texas registration period), the misstatement (the start of the federal repose period when it differs from the sale), and discovery (the start of the shorter discovery periods). Discovery is judged objectively. A missed distribution, a sponsor's letter admitting a problem, a regulator's press release or a drop in reported value can each start the clock whether or not the investor read them that way.

What stops or pauses the clock:

• A tolling agreement between the parties, which pauses the discovery-based periods while they negotiate. It cannot revive a period that has already expired, and most courts hold it cannot extend a statute of repose. The guide on tolling agreements explains the terms.
• Filing in FINRA arbitration, which under Rule 12206 tolls court deadlines while FINRA retains the claim, and filing in court, which tolls the six-year eligibility period.
• Fraudulent concealment under Texas law, for the four-year periods only.
• A pending class action covering the same claims, which pauses the discovery-based federal period for absent class members, though not the repose period.

Example

Suppose an Irving investor buys units in a private fund in March 2021 after the sponsor's memorandum overstates the fund's existing assets. Quarterly reports are rosy until a letter in February 2024 discloses that two properties were never acquired. Under the Texas Securities Act the three-year discovery period runs to February 2027, but the five-year repose period ends in March 2026, so March 2026 is the real deadline for that claim. Under Rule 10b-5 the two-year discovery period ends in February 2026 and the five-year repose in March 2026. Texas common-law fraud runs four years from February 2024, to February 2028, and is the only claim still available if nothing is filed by spring 2026. A tolling agreement signed in 2025 would hold the discovery periods but not the March 2026 repose dates.

FINRA's six years is not a statute of limitations

FINRA Rule 12206 makes a claim ineligible for FINRA arbitration if six years have passed since the occurrence or event that gave rise to it. It is an eligibility rule for that forum. It does not extend any Texas or federal deadline, and a claim that is eligible at FINRA can still be time-barred under the law the arbitrators apply. The reverse is also true: a claim dismissed as ineligible may still be filed in court if a court period remains.

For sellers and companies: using the deadlines

A company facing a potential claim can take two steps that depend on the calendar. It can make a compliant rescission offer under the Texas Securities Act, which starts the 30-day rejection window and the one-year period. And it can resist a tolling agreement when repose is close, because a repose date that passes ends the Texas Securities Act and federal claims regardless of what the buyer later learns. Both choices have costs, and both belong in a conversation with a litigator before any letter goes out.

When to involve a litigator

The day you first suspect the investment was not what it was described to be, because that day may already be the start of a two- or three-year clock, and the five-year repose dates were fixed the day you bought. A litigator can date each period, tell you which claims remain and decide whether to file, negotiate under a tolling agreement or demand rescission. Tina Wysk handles securities and investment claims for investors and companies in Dallas state and federal courts and in arbitration.