Supreme Court questions SEC disgorgement power

The Supreme Court heard arguments on April 20 in *Sripetch v. Securities and Exchange Commission*, a case that could narrow when the SEC can force defendants to give up illegal profits. (supremecourt.gov) (scotusblog.com) The question is whether the SEC must show investors suffered measurable financial loss before a court can order disgorgement, the remedy that strips a defendant of unjust gains. (scotusblog.com) (law.cornell.edu) Petitioner Ongkaruck Sripetch told the justices that Section 78u, read against the Court’s 2020 decision in *Liu v. SEC*, allows disgorgement only when it serves compensation for injured investors. (supremecourt.gov) (mcguirewoods.com) The government answered that Congress amended the securities laws after *Liu* and gave courts express authority to order disgorgement of unjust enrichment, even when investor losses are hard to trace dollar-for-dollar. (mcguirewoods.com) (venable.com) The case reached the Court after the Ninth Circuit let the SEC seek disgorgement without proof that investors suffered pecuniary harm, creating a conflict with the Second Circuit’s narrower view. (supremecourt.gov) (venable.com) In Sripetch’s own case, lower courts imposed about $2.25 million in disgorgement and more than $1 million in prejudgment interest after a Securities and Exchange Commission enforcement action tied to a penny-stock scheme. (oyez.org) (supreme.justia.com) Disgorgement has become one of the SEC’s main money remedies. The agency said it obtained $17.9 billion in monetary relief in fiscal 2025, including $10.8 billion in disgorgement and prejudgment interest. (sec.gov) That helps explain why the case extends beyond one defendant. Lawyers following the argument said the outcome could affect insider-trading, recordkeeping, and fraud cases where victims exist but precise losses are disputed or diffuse. (bloomberglaw.com) (thomsonreuters.com) This is the Supreme Court’s third major pass at SEC disgorgement in roughly a decade, after *Kokesh v. SEC* in 2017 and *Liu v. SEC* in 2020. (thomsonreuters.com) (mcguirewoods.com) A decision is expected by late June or early July, when the Court typically finishes argued cases from its current term. (scotusblog.com) (supremecourt.gov)