The SEC’s disgorgement actions took back $10.8 billion from defendants last year. Now, the US Supreme Court has shored up the commission’s power of disgorgement. Ferdose al-Taie, Lindsay E. Ray and J. Tyler Wampler of Baker Donelson explore the history of the commission’s disgorgement powers and what the ruling means going forward.
In a unanimous decision June 4, the US Supreme Court ruled that the SEC may obtain disgorgement in enforcement actions without needing to prove investors suffered pecuniary loss.
Writing for the court, Justice Neil Gorsuch affirmed the 9th US Circuit Court of Appeal’s opinion that the SEC was not required to prove pecuniary harm to investors before seeking disgorgement from Sripetch, which had previously pleaded guilty to selling unregistered securities and operating fraudulent “pump and dump” schemes. The court also resolved a circuit split between the 1st and 9th circuits, on the one hand — which had held that the SEC may obtain disgorgement without proving investors have suffered pecuniary loss — and the 2nd Circuit, on the other hand — which had held the opposite. Notably, Justice Clarence Thomas filed a concurring opinion, raising the separate question of whether disgorgement under Title 15 of the US code is now a legal remedy that triggers the Seventh…
