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.