Challenge to SEC’s Disgorgement Authority Reaches Supreme Court

January 6, 2020

Since the 1970s, disgorgement of ill-gotten gains has been a mainstay of the SEC’s enforcement program. Although no statute expressly authorizes the SEC to obtain disgorgement in civil enforcement actions, courts routinely award disgorgement to the SEC as a component of authorized “equitable” remedies. The Supreme Court’s 2017 decision in Kokesh v. SEC, however, characterized SEC disgorgement as a “penalty” rather than an equitable remedy, casting doubt on the SEC’s disgorgement authority in civil enforcement actions. In this article, we discuss the potential implications of the Supreme Court’s recent grant of certiorari in Liu v. Securities and Exchange Commission, a case that will clarify whether disgorgement remains available to the SEC in civil actions to enforce federal securities laws.