FOR PUBLICATION
  UNITED STATES COURT OF APPEALS
       FOR THE NINTH CIRCUIT

HEIDE BETZ,                                No. 05-15704
                Plaintiff-Appellant,          D.C. No.
                v.                         CV-03-03231-SI
TRAINER WORTHAM & COMPANY,                   ORDER
INC.; DAVID P. COMO; FIRST                  AMENDING
REPUBLIC BANK, a Nevada                    OPINION AND
corporation; ROBERT VILE,                   AMENDED
             Defendants-Appellees.
                                            OPINION

       Appeal from the United States District Court
          for the Northern District of California
      Susan Yvonne Illston, District Judge, Presiding

                  Argued and Submitted
       February 12, 2007—San Francisco, California

                  Filed October 4, 2007
                Amended February 26, 2008

     Before: John T. Noonan, Jr., Ronald M. Gould, and
           Johnnie B. Rawlinson, Circuit Judges.

                          Order;
         Dissent to Order by Chief Judge Kozinski
                  Opinion by Judge Gould




                            1639
              BETZ v. TRAINER WORTHAM & CO.             1643


                        COUNSEL

Joseph M. Alioto, San Francisco, California, Theodore F.
Schwartz, St. Louis, Missouri, and Myron Moskovitz, Berke-
ley, California, for the plaintiff-appellant.

Sara B. Brody and Alexander M.R. Lyon, Heller Ehrman,
LLP, San Francisco, California, for the defendants-appellees.
1644            BETZ v. TRAINER WORTHAM & CO.
                            ORDER

  The opinion filed on October 4, 2007 is amended as fol-
lows.

The last sentence of the second paragraph in Part I, which
reads:

    Betz told Como and Castro that she knew nothing
    about stocks and bonds and that she only would
    understand the “bottom line,” or total balance, of her
    account.

shall be deleted in its entirety.

In addition, the second and third sentences of footnote 4,
which currently read:

    In Davis v. Birr, Wilson & Co., 

(9th
    Cir.1988), for example, we concluded that summary
    judgment on the issue of notice was proper because
    the plaintiff was a well-educated and experienced
    investor who made suggestions to his broker about
    his portfolio and who described himself as a “sophis-
    ticated investor.” 

By contrast, Betz had
    informed the defendants that she had no experience
    with stocks or bonds and would only understand the
    bottom line of her account statements, and thereafter,
    if we credit Betz’s testimony, received specific
    assurances from the president of Trainer Wortham
    that her account problems would be resolved and
    that she should forego suit.

shall be deleted and replaced with the following text:

    For example, in Davis v. Birr, Wilson & Co., 

(9th Cir. 1988) (per curiam), a case pre-
    dating our adoption of the inquiry-plus-reasonable-
               BETZ v. TRAINER WORTHAM & CO.                  1645
    diligence standard for inquiry notice in federal secur-
    ities fraud cases, we concluded that summary judg-
    ment on the issue of notice was proper where the
    plaintiff took an active role in the management of his
    investments and made suggestions to his broker
    about his portfolio. See 

By contrast, Betz
    merely expressed generalized concerns about her
    declining account balance, in response to which, if
    we credit Betz’s testimony, she received specific
    assurances from the president of Trainer Wortham
    that her account problems would be resolved and
    that she should forego suit. No such evidence of
    assurances from the highest levels of the defendant
    securities firm was present in Davis.

  Having made the foregoing amendments to the opinion, all
judges on the panel have voted to deny Defendant/Appellee’s
Petition for Panel Rehearing, and so that petition is DENIED.

  The full court has been advised of Defendant/Appellee’s
Petition for Rehearing En Banc, and a judge of this court
requested a vote on whether this case should be reheard en
banc; however, a majority of the active judges did not vote in
favor of en banc consideration. Fed. R. App. P. 35. Accord-
ingly, the Petition for Rehearing En Banc is also DENIED.
No further petitions for rehearing or rehearing en banc shall
be accepted.



KOZINSKI,       Chief     Judge,    with    whom Judges
O’SCANNLAIN and BEA join, dissenting from the order
denying the petition for rehearing en banc:

   Here we are, out in left field again. The panel’s unique
interpretation of the statute of limitations for securities fraud
puts us at odds with ten other circuits.
1646           BETZ v. TRAINER WORTHAM & CO.
   This isn’t one of those byzantine securities cases involving
risk-indexed convertible debentures or rupee-denominated
strip bonds; there was no Gibbon-length, fine-print prospectus
artfully concealing liabilities. Betz claims, rather, that defen-
dant induced her to invest $2.2 million by promising a
princely return with zero risk. Slip op. at 1656-1657. This
purported oral promise—which flatly contradicts Betz’s writ-
ten contract and common sense—is her sole theory of fraud.
If a securities defendant in a simple case like this cannot use
the statute of limitations as a shield against the costs and haz-
ards of trial, then no defendant can, and the statute of limita-
tions Congress passed for 10b-5 cases is pretty much a dead
letter in this circuit.

   Betz found out that her investment wasn’t risk-free after all
by February 2000, when she received an account statement
from the bank showing a balance $170,000 lower than her ini-
tial investment. How could a risk-free investment result in
such a massive loss of principal? Doesn’t risk-free mean that
the principal will never diminish? Betz admits that she read
the statement and grasped the “bottom line.” 

principal steadily dwindled; she received 29 more account
statements charting its inexorable decline. One would think
that a sane, rational, reasonable investor who discovered that
her principal was fast disappearing after she had been prom-
ised that it would not be “touch[ed],” 

that
someone lied to her. Yet Betz waited three and a half years
to bring suit—nearly double the time Congress allowed. 28
U.S.C. § 1658(b)(1).

   The panel keeps Betz’s lawsuit alive by invoking the man-
tra of material issues of fact that only a jury can decide. Slip
op. at 1669. But there’s no factual dispute here; everyone
agrees on what Betz knew and when she knew it. The
only question is whether those facts were enough to put a rea-
sonable investor on inquiry notice. See p.1647 infra. Ten other
circuits have held that “inquiry notice . . . . may be determined
as a matter of law where, as here, the underlying facts are
                   BETZ v. TRAINER WORTHAM & CO.                         1647
admitted or undisputed.” Maggio v. Gerard Freezer & Ice
Co., 

, 128 (1st Cir. 1987).1 Paddling stubbornly
against the current, the panel insists that only a jury can decide.2

   But there’s more, so much more. According to the same ten
circuits, the statute of limitations starts to run when plaintiff
is on “inquiry notice,” that is, when a reasonable investor in
plaintiff’s position would suspect he had been defrauded. See,
e.g., Sterlin v. Biomune Sys., 

, 1201-02 & n.19
(10th Cir. 1998). The panel pretends to adopt this standard,
but rejects it in fact. Since Betz’s theory of fraud is that she
was told her money would not be put at risk, she had at least
inquiry notice that someone had lied to her when she saw her
principal melt away like a popsicle in July. The appendix tells
the tale in Betz’s own hand: It is her account statement from
January 2001, showing a balance that was by then nearly $1
million below her initial investment. Scribbled in the margin
are Betz’s notes describing a “panic[ked]” phone call to her
   1
     Four other circuits make the point in equally direct terms. See Mathews
v. Kidder, Peabody & Co., 

, 250 n.13 (3d Cir. 2001); Great
Rivers Coop. of Se. Iowa v. Farmland Indus., Inc., 

, 896 (8th
Cir. 1997); Dodds v. Cigna Sec., Inc., 

, 352 n.3 (2d Cir. 1993);
Brumbaugh v. Princeton Partners, 

, 162 (4th Cir. 1993).
Another five circuits, though not stating the rule in so many words, have
acted on it by holding, as a matter of law, that the statute has run. See
Wyser-Pratte Mgmt. Co. v. Telxon Corp., 

(6th Cir. 2005)
(dismissing complaint on statute-of-limitations grounds); Theoharous v.
Fong, 

(11th Cir. 2001) (same); Treganza v. Great Am.
Commc’ns Co., 

(7th Cir. 1993) (granting summary judgment
on statute-of-limitations grounds); Topalian v. Ehrman, 

(5th Cir. 1992) (same); Anixter v. Home-Stake Prod. Co., 

,
1441-42 (10th Cir.), amended on denial of reh’g, 

(10th Cir.
1991), vacated sub nom. Dennler v. Trippet, 

(1992) (same).
   2
     The panel protests that it hasn’t adopted a “per se rule that in all cases
. . . the issue of inquiry notice must go to a jury,” slip op. at 1670, but
that’s exactly the rule the panel adopts. Inquiry notice depends on what a
reasonable investor would have done; the panel holds that only a jury can
decide what’s reasonable. There is nothing to distinguish this case from
any other; summary judgment simply doesn’t exist in the world the panel
has created.
1648           BETZ v. TRAINER WORTHAM & CO.
account manager complaining about her losses. Though the
opinion doesn’t acknowledge this particular inquiry, it does
mention a similar call Betz placed to the same manager two
months later. Slip op. at 1657. Betz made these inquiries (and
several others like them) more than two years before she sued
in July 2003; so, to save her from the statute of limitations,
the panel must adopt a bizarre definition of inquiry notice:
Notice that actually causes the investor to make inquiries is
nevertheless insufficient to put a reasonable investor on notice
to make inquiries. No other court in the known universe has
adopted such an oxymoronic rule.

   Five other circuits have dealt with cases where investors
claimed they were hoodwinked by promises that their dollars
would multiply like bunnies with absolutely no risk. All five
held that the statute of limitations was triggered as soon as the
investors found out they lost money, if not before. The First
and Third Circuits held that sharply declining balances put
investors on notice that the promised lack of risk was a lie.
Mathews v. Kidder, Peabody & Co., 

, 254 (3d
Cir. 2001) (Nygaard, J.); Cooperativa de Ahorro y Credito
Aguada v. Kidder, Peabody & Co., 

, 224 (1st
Cir. 1997) (Boudin, J.). Had Betz lived in Boston or Philadel-
phia, she would have been on inquiry notice by January 2001,
at the very latest: By then, her account had lost about half its
value, and the bank had confirmed that those losses were real.
The Second, Fourth and Fifth Circuits have held that investors
in Betz’s position are on inquiry notice even earlier—as soon
as they are handed documents warning them that their invest-
ments would be riskier than promised. Dodds v. Cigna Sec.,
Inc., 

, 352 (2d Cir. 1993) (Winter, J.); Brumbaugh
v. Princeton Partners, 

, 163 (4th Cir. 1993)
(Wilkinson, J.); Topalian v. Ehrman, 

, 1134
(5th Cir. 1992) (Garza, J.). Had Betz lived in New York, Bal-
timore or Houston, she would have been on inquiry notice as
soon as she opened her account and received the bank’s “Let-
ter of Understanding,” which told her, in contradiction to the
                  BETZ v. TRAINER WORTHAM & CO.                       1649
alleged oral promise, that her investment was “subject to
investment risk and a possible loss of principal.”

   In reaching the contrary conclusion, the panel holds that
Betz couldn’t be on inquiry notice until she had solid proof
of every single element of her 10b-5 claim, including scienter.
Slip op. at 1669. And, without more proof of scienter, the
panel opines, a reasonable investor in Betz’s position would
have believed that the bank really did mean to put the money
into 30-day T-bills, but somehow got confused and bought
volatile stocks instead. According to the panel, it wouldn’t
have crossed a reasonable investor’s mind that the bank lied
when it promised a risk-free investment until June 2002, when
Betz had lost about four-fifths of her principal and the bank
refused to make good her losses. See slip op. at 1657.3 The
argument does serious violence to “reasonable investor” and
“inquiry notice.”

   The panel cites no authority supporting its curious notion
that an investor isn’t on inquiry notice until he has concrete
proof of every element of his claim, including scienter. There
is no such authority; ten circuits disagree. Tellingly, the only
on-point case the panel cites,4 Fujisawa Pharmaceutical Co.
   3
     The panel doesn’t explain what’s so special about June 2002, except
that it’s less than two years before Betz brought suit. Betz certainly
learned nothing new then about what the bank’s state of mind was at the
time she opened her account. The panel seems to attribute some signifi-
cance to the fact that in June 2002 the bank refused to make good Betz’s
losses. But what does that have to do with scienter or Betz’s theory of lia-
bility?
   4
     The panel also cites two of our cases that stand for the unremarkable
proposition that falling stock prices alone do not always put plaintiffs on
inquiry notice of fraud. Livid Holdings Ltd. v. Salomon Smith Barney,
Inc., 

, 951 (9th Cir. 2005); Gray v. First Winthrop Corp., 

, 881 (9th Cir. 1996). Those cases aren’t relevant to the question
of whether plaintiff must always have proof of scienter to trigger the stat-
ute of limitations, because the fraud there was a misrepresentation about
the value of the underlying asset. A falling share price is, at best, only
indirect evidence of such fraud. Here, by contrast, the falling price was
direct—and incontrovertible—proof that the investment was riskier than
allegedly promised.
1650            BETZ v. TRAINER WORTHAM & CO.
v. Kapoor, 

(7th Cir. 1997) (Posner, C.J.), holds
just the opposite. Fujisawa considered the panel’s position:

      [Plaintiff] contends that the statute of limitations
      doesn’t begin to run until the victim has in hand all
      the facts he needs in order to bring suit immediately
      ....

But unlike our panel, the Seventh Circuit saw the
obvious problem with this approach: If the statute doesn’t
start to run until plaintiff has proof of every element of his
claim, plaintiff has no incentive to bring suit promptly.
Instead, he will often prefer a “wait-and-see” approach:

      On this view, the potential plaintiff can complete his
      investigation, draft his complaint, and put the com-
      plaint in a drawer to be taken out in a year and filed
      if the price of the stock has fallen.

is unfair to defendants, as the Fourth Circuit
recognized in a similar case. While plaintiff is waiting to see
whether his investment recovers on its own, defendant “loses
the security of knowing when legal action against him has
been foreclosed.” 

. Plaintiff, by
contrast, gets the benefit of a “heads I win, tails you lose” bet:
If the investment goes up, he reaps the profit; if it goes down,
he gets to recover his losses in court. Worse still, plaintiff’s
delay may prejudice defendant’s case as “[m]emories fade,
documents are lost, [and] witnesses become unavailable.” 

spins out the statute of limitations long enough, he
may be able to “coerce settlement[ ] simply because aging has
improved an originally meritless claim.” 

opin-
ion, we might as well rename the PSLRA in the Ninth Circuit
as the SPLFEA (Securities Plaintiffs Lawyers’ Full Employ-
ment Act).
                BETZ v. TRAINER WORTHAM & CO.                  1651
   For all those reasons, every other circuit to consider the
issue has followed the rule explained in Brumbaugh and Fuji-
sawa: “[T]he facts that put the victim of the fraud on notice
can fall short of actual proof of fraud.” 

. Five other circuits state the point just as bluntly. See
Wyser-Pratte Mgmt. Co. v. Telxon Corp., 

, 564
(6th Cir. 2005) (plaintiff “may not delay the commencement
of the statute of limitations until after it has secured direct evi-
dence of [defendant’s] culpability”); Tello v. Dean Witter
Reynolds, Inc., 

, 1283 (11th Cir. 2005)
(“[i]nquiry notice is triggered by evidence of the possibility of
fraud,” not “[f]ull exposition of the scam” itself (internal quo-
tation marks omitted)); 

; 

(“An investor does not have to have notice of the
entire fraud being perpetrated to be on inquiry notice.”); Ken-
nedy v. Josephthal & Co., 

, 802 (1st Cir. 1987).

   Other circuits express the same idea by analogizing inquiry
notice to “storm warnings”—hints that something may be
amiss so that the investor needs to start asking some hard
questions. A plaintiff has storm warnings—and is therefore on
inquiry notice—long before the storm itself is upon him.
Where, as here, an investor is promised a certain return on a
risk-free investment, but instead loses money by the bushel,
the losses are storm warnings that the promise may have been
a lie. See Sudo Props., Inc. v. Terrebonne Parish Consol.
Gov’t, 

, 377 (5th Cir. 2007) (decline in value of
plaintiff’s investment is a “storm warning” putting plaintiff on
notice that defendant’s promises were lies); 

(“storm warnings” include “information . . . that
conflicts with representations that were made when the securi-
ties were originally purchased”); Davidson v. Wilson, 

, 1402 (8th Cir. 1992) (“storm warnings” include
reports from defendants showing “a substantial discrepancy
between the amounts promised and those actually received”).
We are the only circuit to hold that plaintiff has no storm
warnings until the hurricane makes landfall.
1652              BETZ v. TRAINER WORTHAM & CO.
   The panel makes matters even worse by throwing a second
pipe wrench into the machinery of the statute of limitations.
As an alternative ground, the panel holds that, even if Betz
was on inquiry notice of possible fraud—and thus had a duty
to inquire—the bank thwarted her inquiries by giving her “as-
surances” that her fortunes would improve. Slip op. at 1669.
Because of those assurances, the panel tells us, a reasonable
investor in Betz’s position just couldn’t have figured out that
the bank had lied and therefore would have had no grounds
for filing suit. That’s truly what they say; check it out. 

a handful of cases where a defendant’s outright
lies and malfeasances prevented an investor who made dili-
gent inquiries from discovering facts known only to the defen-
dant. In such cases, courts have held that the statute wasn’t
triggered. For instance, the panel cites SEC v. Seaboard
Corp., 

(9th Cir. 1982), where plaintiff claimed
he asked defendant tough questions about facts that were in
defendant’s exclusive possession, and defendant responded by
lying about those facts. As a result, plaintiff held off suing. 

Applying a pre-Celotex standard,5 we held that
there was a factual dispute as to whether plaintiff could have
discovered those facts on his own. Id.; see also, e.g., Marks
v. CDW Computer Ctrs., Inc., 

, 365-66 (7th Cir.
1997) (plaintiff inquired about fraud but defendant lied and
refused to allow plaintiff to inspect the company’s books).

   But ours is not a case where defendant thwarted plaintiff
from developing the facts. Indeed, Betz doesn’t claim that the
bank misrepresented any facts. The bank did not, for example,
  5
    Four years after we decided Seaboard, the Supreme Court revised the
standard for summary judgment in Celotex Corp. v. Catrett, 

,
322 (1986). Along with two other cases decided that Term, Celotex “sig-
nal[ed] to the lower courts that summary judgment can be relied upon
more so than in the past to weed out frivolous lawsuits and avoid wasteful
trials.” 10A Charles Alan Wright et al., Federal Practice and Procedure
§ 2727 (3d ed. 1998). It’s unclear how Seaboard would come out in a
post-Celotex world.
               BETZ v. TRAINER WORTHAM & CO.                1653
tell Betz that she still had 100 percent of her principal, even
though the statements didn’t show it. Quite the opposite: The
bank confirmed that Betz’s principal was gone. The bank did
predict she would get her money back when the stock market
recovered, but such a statement only confirms that plaintiff’s
investment is subject to market fluctuations and is therefore
not free from risk. A defendant who conceals facts may con-
ceivably prevent a reasonably diligent investor from discover-
ing the truth, but a defendant who jollies a disappointed
investor along with sunny forecasts of future bull markets
conceals nothing and thus does not prevent the investor from
gathering enough information to bring suit.

   The panel’s alternate ruling is as bad as the first, perhaps
worse. One wonders what a securities defendant could say to
an unhappy investor that would not, under the panel’s loosey-
goosey standard, toll the statute of limitations forever, no mat-
ter how many storm warnings the investor has received. If
gale-force winds that uproot half of one’s property can be
neutralized by a forecast of clear skies and mild breezes to
come, then anything a defendant may say or refuse to say
will, under the panel’s holding, constitute deliberate conceal-
ment that prevents plaintiff from learning what he needs to
bring suit. Needless to say, no other circuit has hacked this
gaping hole into the statute of limitations. See, e.g., Whirlpool
Fin. Corp. v. GN Holdings, Inc., 

, 610 (7th Cir.
1995) (defendants attributed poor performance to a market
recession, rather than fraud, but that couldn’t have prevented
plaintiffs from discovering the facts needed to bring suit); De
la Fuente v. DCI Telecomms., Inc., 

, 385
(S.D.N.Y. 2002) (defendants’ disclosures were “tempered
with positive statements,” but that optimism couldn’t have
prevented investors from discovering the facts needed to bring
suit).

                         *     *      *

   By holding that only a jury can decide when the statute of
limitations is triggered, the panel parts company with ten
1654           BETZ v. TRAINER WORTHAM & CO.
other circuits and forces defendants to trial even where the
historical facts aren’t in dispute. By inventing a rule that the
statute isn’t triggered until plaintiff gets proof of every ele-
ment of his claim, including scienter, the panel again breaks
with ten other circuits and takes our law even deeper into
uncharted waters. And by holding that the statute stops run-
ning the moment defendant makes a cheerful noise, the panel
effectively writes the statute of limitations off the books.
Businesses unfortunate enough to be sued in this circuit for
securities fraud might as well forget about 28 U.S.C.
§ 1658(b)(1); it is nothing but a filigree on the statutory page.
BETZ v. TRAINER WORTHAM & CO.   1655
        APPENDIX
1656            BETZ v. TRAINER WORTHAM & CO.
                           OPINION

GOULD, Circuit Judge:

   We must decide whether Heide Betz’s federal securities
fraud claim is barred by the statute of limitations.1 We hold
that there is a genuine issue of material fact whether Betz’s
claim is time barred, and we reverse the district court’s sum-
mary judgment for the defendants.

                                I

   On an appeal of summary judgment we, like the district
court, view the evidence in the light most favorable to the
non-moving party and draw all justifiable inferences in the
non-moving party’s favor. Anderson v. Liberty Lobby, Inc.,

, 255 (1986). Viewed in the light most favorable
to Betz, the facts are as follows:

   In 1999, Betz, a retired art dealer, sold her house for $2.2
million. Betz planned to buy a co-op and invest the proceeds
of the sale of her house to provide interest income. An
employee of First Republic Bank named Carmen Castro intro-
duced Betz to David Como, an employee of Trainer
Wortham, an investment subsidiary of First Republic Bank.
Como and Castro recommended that Betz invest the proceeds
from the sale of her house with Trainer Wortham. Como and
Castro assured Betz that, if she invested her $2.2 million with
Trainer Wortham, she could withdraw $15,000 per month
from her portfolio, for living expenses, without touching the
$2.2 million in principal.

  According to Betz, on June 7, 1999, Betz entered into an
oral agreement with Como, who was acting on behalf of
Trainer Wortham, giving the defendants control over her $2.2
  1
   In a separately-filed memorandum disposition, we resolve Betz’s
appeal of the district court’s disposition of her state law claims.
               BETZ v. TRAINER WORTHAM & CO.             1657
million. Betz and Como agreed that Como would invest
Betz’s money “in such a fashion that [Betz] would receive
$15,000 a month from the profit of the investment and that
[the defendants] would not touch the principal.” The same
day, Betz and Como, who was again acting on Trainer
Wortham’s behalf, entered into a written “Letter of Under-
standing for Portfolio Management and Administration Ser-
vices” and an “Investment Management Agreement.” These
documents explicitly stated that Betz’s account was subject to
market risk and that “no person has represented to [Betz] that
any particular result can or will be achieved.” However, these
documents also contained no “merger” or “integration”
clauses and made no reference to the alleged oral agreement
regarding Betz’s $15,000 in monthly maintenance income.

   After Betz opened her account with Trainer Wortham, she
received account statements at least once per month. In Febru-
ary 2000, Betz received a statement reflecting an account
value below her initial investment of $2.2 million. Between
February 2000 and July 2001, Betz received twenty-nine
more account statements, each reflecting an account balance
of less than $2.2 million. In March 2001, Betz’s account bal-
ance had dropped to $848,000. Around that time, Betz spoke
with Robert Vile, a Trainer Wortham employee, to express
concern about the declining value of her account. Vile told
Betz that the declining balance was attributable to her
monthly $15,000 withdrawals; he assured her, however, that
the shortfall was temporary, that the market would recover,
and that in a year or less her account balance would be back
to $2.2 million. When subsequent account statements showed
the balance of Betz’s account continuing to fall, she met with
Castro, who told her that there was a “serious problem” with
the way Betz’s portfolio had been managed and that the presi-
dent of Trainer Wortham, Charles Moore, would “take care of
the account because it was ‘the right thing to do’ and because
[Trainer Wortham] value[d] their client relationships.” In May
2002, after Betz had met with Moore in person, Castro called
Betz to tell her that “Moore was meeting with other principals
1658           BETZ v. TRAINER WORTHAM & CO.
and attorneys” regarding her account, and that Betz “should
be patient with them and not take any legal action.” However,
in June 2002, Castro advised Betz that Trainer Wortham was
“not going to do anything at all” to remedy the declining
value of her account.

   Betz filed her complaint in this case on July 11, 2003,
alleging that Como, Vile, Trainer Wortham, and First Repub-
lic Bank (collectively, “Trainer Wortham” or “defendants”)
had committed securities fraud in violation of § 10(b) of the
Securities Exchange Act of 1934, 15 U.S.C. § 78j(b), and
Rule 10b-5 of the Securities Exchange Commission, 17
C.F.R. § 240.10b-5. The defendants moved for summary
judgment on the ground that Betz’s federal securities fraud
claim was barred by the statute of limitations. Section 804(a)
of the Sarbanes-Oxley Act of 2002, Pub. L. No. 107-204, 116
Stat. 745, 801 (codified at 28 U.S.C. § 1658(b)), provides that
a suit for securities fraud under § 10(b) of the Securities
Exchange Act must be filed “not later than the earlier of (1)
2 years after the discovery of the facts constituting the viola-
tion; or (2) 5 years after such violation.” The district court
held that, because Betz had inquiry notice of the defendants’
violations of § 10(b) before July 11, 2001, Betz’s claims were
time barred, and on this ground the district court granted sum-
mary judgment for the defendants.

                               II

   We review de novo the district court’s grant of summary
judgment. Olympic Pipeline Co. v. City of Seattle, 

, 877 n.11 (9th Cir. 2006). Federal Rule of Civil Procedure
56(c) entitles a party to summary judgment “if the pleadings,
depositions, answers to interrogatories, and admissions on
file, together with the affidavits, if any, show that there is no
genuine issue as to any material fact and that the moving
party is entitled to a judgment as a matter of law.” As we
noted above, in deciding a motion for summary judgment, we
               BETZ v. TRAINER WORTHAM & CO.                1659
view the evidence in the light most favorable to the non-
moving party. 

.

                              III

  The defendants contend that Betz’s suit is time barred
because she had both actual and inquiry notice of the facts
giving rise to her claim. Betz contends that she had neither.

   [1] We first address actual notice. Betz’s suit is timely only
if she filed it “not later than . . . 2 years after the discovery
of the facts constituting the violation.” 28 U.S.C. § 1658(b).
Viewing the facts in the light most favorable to Betz, there is
a genuine issue of fact about whether Betz actually discovered
that she had a claim against the defendants for securities fraud
more than two years before she filed her suit on July 11, 2003.
For Betz to have a claim under § 10(b), the defendants must
have had, among other things, scienter, which is the “mental
state embracing intent to deceive, manipulate, or defraud.”
See Ernst & Ernst v. Hochfelder, 

, 193-94 n.12
(1976); see also Simpson v. AOL Time Warner Inc., 

, 1047 (9th Cir. 2006) (listing the elements of a federal
securities fraud claim), petition for cert. filed sub nom. Avis
Budget Group, Inc. v. Cal. State Teachers Ret. Sys., No. 06-
560 (U.S. filed Oct. 19, 2006). In In re Silicon Graphics Inc.
Securities Litigation, 

, 974 (9th Cir. 1999), we
held that to adequately plead scienter, a § 10(b) plaintiff
“must plead, in great detail, facts that constitute strong cir-
cumstantial evidence of deliberately reckless or conscious
misconduct.” We went on to describe this heightened plead-
ing standard as follows:

    Our holding rests, in part, on our conclusion that
    Congress intended to elevate the pleading require-
    ment above the Second Circuit standard requiring
    plaintiffs merely to provide facts showing simple
    recklessness or a motive to commit fraud and oppor-
    tunity to do so. We hold that although facts showing
1660             BETZ v. TRAINER WORTHAM & CO.
      mere recklessness or a motive to commit fraud and
      opportunity to do so may provide some reasonable
      inference of intent, they are not sufficient to estab-
      lish a strong inference of deliberate recklessness. In
      order to show a strong inference of deliberate reck-
      lessness, plaintiffs must state facts that come closer
      to demonstrating intent, as opposed to mere motive
      and opportunity. Accordingly, we hold that particu-
      lar facts giving rise to a strong inference of deliber-
      ate recklessness, at a minimum, is required to satisfy
      the heightened pleading standard under the PSLRA.

cannot say that, as a matter of law, Betz, before July
11, 2001, actually discovered facts suggesting that the defen-
dants consciously or deliberately and recklessly deceived her.
Under the version of facts presented by Betz, a reasonable
factfinder could conclude that Betz did not discover that the
defendants intentionally misled her into believing that she
could withdraw $15,000 per month without depleting her
principal until June 2002, when Moore told her that Trainer
Wortham was “not going to do anything” to fix her account.

   If the statute of limitations began running only upon Betz’s
actual discovery of the facts giving rise to her securities fraud
claim, this would end our inquiry. However, the defendants
contend that, even if Betz did not actually discover the facts
underlying her claim before July 11, 2001, Betz was on “in-
quiry notice” of her claim before that date, and that her claim
therefore is still barred by the statute of limitations. We
address that argument in the next section.
                  BETZ v. TRAINER WORTHAM & CO.                     1661
                                   IV

                                   A

   [3] We have held that the statute of limitations for a federal
securities fraud claim begins to run when the plaintiff has
either actual or inquiry notice that the defendants have made
a fraudulent misrepresentation. See, e.g., Gray v. First Win-
throp Corp., 

, 881 (9th Cir. 1996); Volk v. D.A.
Davidson & Co., 

, 1412 (9th Cir. 1987). In
more recent cases, however, it has been suggested that under
the United States Supreme Court’s decision in Lampf, Pleva,
Lipkind, Prupis & Petigrow v. Gilbertson, 

(1991), only actual notice of the facts forming the alleged
fraud, and not inquiry notice of those facts, triggers the run-
ning of the statute of limitations for a § 10(b) claim.2 See
Berry v. Valence Tech., Inc., 

, 704 (9th Cir.
1999); see also Livid Holdings Ltd. v. Salomon Smith Barney,
Inc., 

, 951 (9th Cir. 2005). The uncertainty intro-
duced by our opinion in Berry led us to suggest in Livid Hold-
ings that, notwithstanding our unequivocal pre-Lampf case
law, we had “considered, but not made a final determination
on whether actual or inquiry notice of the alleged fraud trig-
gers the running of Rule 10b-5’s statute of limitations.” Livid

.

   [4] In Lampf, the Supreme Court resolved a split among the
circuits regarding the statute of limitations applicable to a
§ 10(b) claim. See 

. Some circuits had
borrowed state statutes of limitations, while others had estab-
lished a unique federal limitations period. See 

n.1.
The Supreme Court in Lampf held that the statute of limita-
  2
    Though Gray was decided after the Supreme Court handed down
Lampf, in Gray we applied pre-Lampf statute of limitations principles pur-
suant to 15 U.S.C. § 78aa-1(a), which provides that pre-Lampf limitations
periods apply to suits filed before Lampf was decided. See 

n.1, 880-81.
1662             BETZ v. TRAINER WORTHAM & CO.
tions provided in § 9(e) of the Securities Exchange Act, 15
U.S.C. § 78i(e), was the appropriate standard. See 

n.9. Section 9(e) provides that “[n]o action shall
be maintained to enforce any liability created under this sec-
tion, unless brought within one year after the discovery of the
facts constituting the violation and within three years after
such violation.”3 No one disputes that “discovery” can occur
when a plaintiff actually discovers facts giving rise to his or
her claim. However, Lampf left it to the lower courts to decide
whether “discovery” occurs only upon actual notice or
whether “discovery” can occur on some form of inquiry
notice.

   [5] We hold that either actual or inquiry notice can start the
running of the statute of limitations on a federal securities
fraud claim. While it is unquestioned that actual notice can
mark the beginning of the limitations period, two things hap-
pened in the aftermath of Lampf that convince us that an
inquiry notice standard should also apply to federal securities
fraud claims. First, the courts of appeal in our sister circuits,
along with the district courts in our own circuit, have uni-
formly embraced inquiry notice. In fact, “every circuit to have
addressed the issue since Lampf has held that inquiry notice
is the appropriate standard.” 

; see Fin.
Sec. Assurance, Inc. v. Stephens, Inc., 

, 1267-68
(11th Cir. 2006); Shah v. Meeker, 

, 249 (2d Cir.
2006); Glaser v. Enzo Biochem, Inc., 126 Fed. App’x 593,
597 (4th Cir. 2005) (citing Brumbaugh v. Princeton Partners,

, 162 (4th Cir. 1993)); New England Health
Care Employees Pension Fund v. Ernst & Young, LLP, 

, 500 (6th Cir. 2003); In re NAHC, Inc. Sec. Litig.,

, 1325 (3d Cir. 2002); Young v. Lepone, 

, 8 (1st Cir. 2002); Ritchey v. Horner, 

,
638-39 (8th Cir. 2001); Sterlin v. Biomune Sys., 

   The one year/three year limitations period set forth in § 9(e) still
applies to securities fraud suits filed before the enactment date of
Sarbanes-Oxley, July 30, 2002. See Sarbanes-Oxley Act § 804(b).
               BETZ v. TRAINER WORTHAM & CO.                1663
1191, 1199-1200 (10th Cir. 1998); Marks v. CDW Computer
Ctrs., Inc., 

, 367 (7th Cir. 1997); Topalian v.
Ehrman, 

, 1134-35 (5th Cir. 1992). Likewise,
the district courts in our circuit regularly apply an inquiry
notice standard to § 10(b) claims. See, e.g., In re Micron
Techs., Inc. Sec. Litig., No. CV-06-085-S-BLW, 

, at *4 (D. Idaho Feb. 21, 2007); In re Immune
Response Sec. Litig., 

, 1026 (S.D. Cal.
2005); In re Infonet Servs. Corp. Sec. Litig., 

, 1113 (C.D. Cal. 2003); Getty v. Harmon, 

1053, 1055 (W.D. Wash. 1999); Freedman v. La.-Pac.
Corp., 

, 395 (D. Or. 1996); In re Syntex
Corp. Sec. Litig., 

, 1099 (N.D. Cal. 1994),
aff’d, 

(9th Cir. 1996); Aizuss v. Commonwealth
Equity Trust, 

, 1486 (E.D. Cal. 1993).
While not binding on us, the reasoned opinions of ten of our
sister circuits and the widespread practices of the district
courts in our own circuit weigh heavily in favor of holding
that inquiry notice can trigger the running of the statute of
limitations on a securities fraud claim. The uniformity of the
precedent in this direction sends a signal message that inquiry
notice, and not merely actual notice, can cause the statute of
limitations for securities fraud to begin to run.

   [6] The second post-Lampf event that convinces us that an
inquiry notice standard is appropriate is an act of Congress.
In the Sarbanes-Oxley Act of 2002, Congress extended the
limitations period for § 10(b) suits from “one year after the
discovery of the facts constituting the violation,” 15 U.S.C.
§ 78i(e), to “2 years after the discovery of the facts constitut-
ing the violation” for actions commenced after July 30, 2002,
28 U.S.C. § 1658(b); Sarbanes-Oxley Act, § 804(b). In its
new enactment, Congress opted for language identical to the
language previously in effect in § 9(e) of the Securities
Exchange Act, 15 U.S.C. § 78i(e). The Supreme Court has
instructed that we should assume that Congress is aware of
the prevailing case law and legislates in its light. See Cannon
v. Univ. of Chicago, 

, 696-97 (1979) (“It is
1664           BETZ v. TRAINER WORTHAM & CO.
always appropriate to assume that our elected representatives,
like other citizens, know the law . . . .”); see also Merrill
Lynch, Pierce, Fenner & Smith, Inc. v. Curran, 

,
379 (1982) (interpreting the Commodity Exchange Act in
light of pre-enactment case law). In 2002, the prevailing case
law in the lower federal courts interpreted the language of
§ 9(e) to mean that the limitations period could be com-
menced upon some form of inquiry notice. By choosing lan-
guage nearly identical to the language of § 9(e), Congress
implicitly approved of that case law. See 

(interpreting Title IX to provide a private cause of
action because Congress used language identical to that found
in Title VI, which had already been interpreted by the courts
to provide a private cause of action); Abrego v. Dow Chem.
Co., 

, 684 (9th Cir. 2006) (per curiam) (holding
that the silence of the Class Action Fairness Act regarding the
burden of proving removal jurisdiction indicated Congressio-
nal intent to leave intact the common law rule placing the bur-
den on the defendant); United States v. Male Juvenile, 

, 1016 (9th Cir. 2002) (noting that “[i]n construing
statutes, we presume Congress legislated with awareness of
relevant judicial decisions” and holding that Congress’s fail-
ure to explicitly include “tribal governments” within the Fed-
eral Juvenile Delinquency Act’s definition of “State,” when
amending other parts of the Act, “may be interpreted as an
endorsement of the judicial decisions excluding tribes from
the definition of ‘State’ ”).

   [7] We recognize that the pragmatic effects of applying an
inquiry notice standard to § 10(b) are both positive and nega-
tive for individual litigants. As was suggested in Berry, a case
decided under the old one-year limitations period, such a stan-
dard may compel plaintiffs to file a suit based on “skimpy
facts.” See 

n.6 (quoting Charles Benja-
min Nutley, Comment, Triggering One-Year Limitations on
Section 10(b) and Rule 10b-5 Actions: Actual or Inquiry Dis-
covery?, 30 San Diego L. Rev. 917, 948 (1993)). However,
Congress’s extension of the relevant limitations period from
                BETZ v. TRAINER WORTHAM & CO.                 1665
one to two years alleviates this concern and allows us to con-
clude that an inquiry notice standard strikes an acceptable bal-
ance between the interest in requiring plaintiffs promptly to
file suit and the competing interest in avoiding the encourage-
ment of baseless or premature suits by requiring plaintiffs to
sue before they can discover the facts underlying their claims.
See New England Health Care Employees Pension 

; 

; 

.

                                B

   [8] We have previously stated that, if we were to adopt an
inquiry notice standard for § 10(b) suits, we would apply a
standard similar to that applied by the Tenth Circuit. See Livid

; 

. Today we
adopt the inquiry-plus-reasonable-diligence test used by the
Tenth Circuit. See, e.g., Sterlin v. Biomune Sys., 

, 1201 (10th Cir. 1998) (holding that inquiry notice “trig-
gers an investor’s duty to exercise reasonable diligence and
that the . . . statute of limitations period begins to run once the
investor, in the exercise of reasonable diligence, should have
discovered the facts underlying the alleged fraud.”). Under
that standard, to determine when the statute of limitations
begins running, we first determine when the plaintiff had
inquiry notice of the facts giving rise to his or her securities
fraud claim. A plaintiff is on inquiry notice when there exists
sufficient suspicion of fraud to cause a reasonable investor to
investigate the matter further. Like our sister circuits, we cau-
tion that inquiry notice should not be construed so broadly
that the particular plaintiff cannot bring his or her suit within
the limitations period. The facts constituting inquiry notice
“must be sufficiently probative of fraud—sufficiently
advanced beyond the stage of a mere suspicion . . . to incite
the victim to investigate.” Fujisawa Pharm. Co. v. Kapoor,

, 1335 (7th Cir. 1997), quoted in Tello v. Dean
Witter Reynolds, Inc., 

, 1284 (11th Cir. 2005).
Once a plaintiff has inquiry notice, we ask when the investor,
in the exercise of reasonable diligence, should have discov-
1666           BETZ v. TRAINER WORTHAM & CO.
ered the facts constituting the alleged fraud. The answer to
that second question tells us when the statute of limitations
began to run.

   [9] The question of whether inquiry notice exists is objec-
tive and contemplates a “reasonable investor” or “reasonable
person” standard. See, e.g., Newman v. Warnaco Group, Inc.,

, 193 (2d Cir. 2003) (citations and internal quo-
tation marks omitted) (holding that inquiry notice of securities
fraud is triggered when the plaintiff receives “sufficient storm
warnings to alert a reasonable person to the probability that
there were either misleading statements or significant omis-
sions involved”); Mathews v. Kidder, Peabody & Co., 

, 252 (3d Cir. 2001) (holding that inquiry notice
exists where “a reasonable investor of ordinary intelligence
would have discovered the [suspicious] information and rec-
ognized it” as suspicious); Great Rivers Coop. of S.E. Iowa v.
Farmland Indus., Inc., 

, 896 (8th Cir. 1997)
(inquiry notice is present “when the victim is aware of facts
that would lead a reasonable person to investigate and conse-
quently acquire actual knowledge of the defendant’s misrep-
resentations.”). The existence of inquiry notice is only the
first prong of the two-part notice-plus-reasonable-diligence
test that we are today adopting, and the second stage of that
inquiry, the question of whether the plaintiff exercised reason-
able diligence in investigating the facts underlying the alleged
fraud, while remaining essentially objective in character, nec-
essarily entails an assessment of the plaintiff’s particular cir-
cumstances from the perspective of a reasonable investor. In
this second stage of the inquiry, one of the factors to be con-
sidered is whether the plaintiff was given any assurances by
a defendant after beginning to investigate the suspicious cir-
cumstances that would have delayed discovery of the fraud by
a reasonable person in the plaintiff’s position. For example, in
a situation much like the instant case, we have held that, when
an investor met with representatives of a defendant company
about possible fraud and was assured that there “had been no
improprieties,” whether the statute of limitations began run-
                  BETZ v. TRAINER WORTHAM & CO.                        1667
ning was a question for the trier of fact. See SEC v. Seaboard
Corp., 

, 1310 (1982). In that case, we con-
cluded that “the question of what a reasonable investor would
have done [under those circumstances] is not so certain as to
allow a determination as a matter of law.” 

the notice-plus-reasonable-diligence stan-
dard we apply to securities fraud claims, the defendant bears
a considerable burden in demonstrating, at the summary judg-
ment stage, that the plaintiff’s claim is time barred. See Sea-
board 

(noting that “the question
of notice of fraud is for the trier of fact” and that “the party
seeking summary disposition has an extremely difficult bur-
den to show that there exists no issue of material fact regard-
ing notice”). “Summary judgment is appropriate only when
uncontroverted evidence irrefutably demonstrates plaintiff
discovered or should have discovered the fraudulent conduct.”

(internal quotations omitted); see also
Mosesian v. Peat, Marwick, Mitchell & Co., 

,
879 (9th Cir. 1984) (“The question of what a reasonably pru-
dent investor should have known is particularly suited to a
jury determination.”).4 Our hesitation to approve summary
  4
    We have in some cases resolved by summary judgment the question of
whether a federal securities plaintiff had sufficient notice of alleged fraud
to trigger the statute of limitations. For example, in Davis v. Birr, Wilson
& Co., 

(9th Cir. 1988) (per curiam), a case predating our
adoption of the inquiry-plus-reasonable-diligence standard for inquiry
notice in federal securities fraud cases, we concluded that summary judg-
ment on the issue of notice was proper where the plaintiff took an active
role in the management of his investments and made suggestions to his
broker about his portfolio. See 

By contrast, Betz merely
expressed generalized concerns about her declining account balance, in
response to which, if we credit Betz’s testimony, she received specific
assurances from the president of Trainer Wortham that her account prob-
lems would be resolved and that she should forego suit. No such evidence
of assurances from the highest levels of the defendant securities firm was
present in Davis. We also affirmed a summary judgment recognizing
inquiry notice in the case of Volk v. D.A. Davidson & Co., 

(9th Cir. 1987). Volk involved several investors who purchased limited
1668              BETZ v. TRAINER WORTHAM & CO.
judgment in securities fraud cases is especially pronounced
where the plaintiff alleges that the defendants’ reassurances
convinced the plaintiff to postpone his or her legal action. See
Vucinich v. Paine, Webber, Jackson & Curtis, Inc., 

, 1436 (9th Cir. 1984).

   We now turn to the facts of this case. Under our inquiry
notice standard outlined above, and keeping in mind that this
case is before us on summary judgment, we ask whether there
is a genuine dispute about whether there existed facts suffi-
ciently probative of fraud to cause a reasonable investor to
conduct a further investigation. Viewing the facts in the light
most favorable to Betz, a rational jury could conclude that a
reasonable investor in Betz’s shoes would not have initiated
further inquiry before July 11, 2001.

partnership interests in coal mining operations marketed as tax shelters
and who were subsequently informed by the general partner both through
a letter and an annual report that the partnership properties did not contain
minable coal reserves as warranted and that the investors might therefore
not be legally entitled to the tax deductions they had been taking. 

The investors argued that the statute of limitations on their secur-
ities fraud claim did not begin running until the IRS disallowed their
deductions and they first suffered out-of-pocket losses, but the court held
as a matter of law that the statute began to run when they received the let-
ter and annual report from the general partner putting them on inquiry
notice of the problem with the coal reserves. See 

However,
Volk differs from the case before us in that the warnings that the Volk
investors received indicated a much more permanent and fundamental
type of problem with the underlying investment than the declining account
balances experienced by Betz, which, at least in theory, could have
reversed themselves over time. In addition, while some of the investors in
Volk also received reassurances from the defendant investment company
when they expressed concerns about the general partner’s communica-
tions, these assurances took the general form of admonitions “not to
worry” about the letter, 

Betz’s case she claims that she was
specifically promised that the president of Trainer Wortham would rem-
edy the problems with her account because it was “the right thing to do”
and that in the meantime she should refrain from taking any legal action
against the company.
                BETZ v. TRAINER WORTHAM & CO.                1669
   [10] The defendants contend that the account statements
Betz received would have spurred a reasonable investor to
inquire further whether Trainer Wortham had defrauded her.
However, the account statements indicated, at most, that the
defendants had failed to fulfill their oral promise that Betz
could withdraw $15,000 per month from her account without
depleting the principal. As a matter of law, we cannot say that
a declining account balance, in and of itself, would have
spurred a reasonable investor to further inquire whether he or
she had been defrauded. See 

(“It is well
settled that poor financial performance, standing alone, does
not necessarily suggest securities fraud . . . , but could also be
explained by poor management, general market conditions, or
other events unrelated to fraud, creating a jury question on
inquiry notice.”); see also Livid 

(“This court has held that financial problems alone are gener-
ally insufficient to suggest fraud.”).

   [11] Likewise, Castro’s statement that there was a “serious
problem” with Betz’s portfolio did nothing more than indicate
to Betz that the defendants had not been able to make good
on their promise of at least $15,000 per month in interest
income. Because such a statement provided no evidence that
the defendants had intentionally or deliberately and recklessly
misled Betz as Silicon Graphics requires to state a claim for
securities fraud, see Silicon 

, a
rational jury could conclude that, upon hearing such a state-
ment, a reasonable investor would not have initiated further
inquiry into the existence of fraud. See Fujisawa 

(noting that “[t]he facts constituting [inquiry]
notice must be sufficiently probative of fraud” (emphasis
added)).

   Moreover, even if Betz was on inquiry notice of fraud,
under the second prong of our inquiry notice standard, we
cannot say that, as a matter of law, Betz, in the exercise of
reasonable diligence, should have discovered the facts consti-
tuting the alleged fraud. In this case, Betz questioned the
1670           BETZ v. TRAINER WORTHAM & CO.
defendants about her account and the defendants assured her
that they would take care of any problems and asked her not
to file suit. In Seabord Corp., the defendant’s giving of assur-
ances in response to a codefendant’s inquiries, which had the
effect of lulling the codefendant and delaying the onset of
legal action, was held to preclude summary judgment and
create an issue for the trier of fact as to when the statute of
limitations began to run. See Seaboard 

. Trainer & Wortham’s assurances to Betz in this case,
which were given as recently as May of 2002, similarly give
rise to a fact issue which makes summary judgment inappro-
priate.

   We do not suggest, however, that there is a per se rule that
in all cases involving assurances from a brokerage firm to an
investor, the issue of inquiry notice must go to a jury. Rather,
we conclude that here, in the total circumstances, and from
the point of view of a reasonable investor, there was a genuine
issue whether Betz should be held to have had notice of secur-
ities fraud.

                               V

   [12] In summary, we hold that, once there exists sufficient
indicia of fraud to cause a reasonable investor to inquire into
whether he or she has been defrauded, the statute of limita-
tions on a claim under § 10(b) of the Securities Exchange Act
begins running when the investor, in the exercise of reason-
able diligence, should have discovered the facts giving rise to
his or her claim. In this case, we cannot say that, as a matter
of law, a reasonable investor in Betz’s position should have
discovered the facts giving rise to her claim before July 11,
2001, especially in light of the express assurances made by
Defendants that they would remedy the problems with the
account, which may have lulled a reasonable investor into
inaction. Thus, a jury must determine whether a reasonable
investor would have discovered the fraud while receiving
active assurances from the highest levels of the securities firm
               BETZ v. TRAINER WORTHAM & CO.             1671
that there was no problem with her account and all would be
made right. We reverse the district court’s judgment in favor
of the defendants and remand this case for further proceedings
consistent with our opinion.

  REVERSED AND REMANDED.