Supreme Court Upholds SEC Disgorgement, but with Some Big Asterisks

The SEC’s authority to seek disgorgement has been a spotlight issue for the last several years, and on June 22, 2020, the Supreme Court delivered a highly anticipated ruling that will have a mixed impact. On one hand, the Court’s ruling in Liu et al. v. Securities and Exchange Commission confirms that the SEC may indeed continue to seek disgorgement in civil enforcement proceedings — a question that had been raised by its 2017 decision in Kokesh v. SEC.1.

However, the Court also placed restrictions on this equitable power, discussing how, over the years, courts have awarded disgorgement in ways that “test the bounds of equity practice.”2 The ruling offers useful tools for companies and individuals negotiating resolutions with the SEC or opposing hefty awards at trial.