Supreme Court weighs SEC disgorgement
- The U.S. Supreme Court heard arguments April 20 in Sripetch v. Securities and Exchange Commission, a case testing whether the agency can win disgorgement without proving investors suffered financial losses. - The dispute turns on Liu v. SEC, the court’s 2020 ruling allowing disgorgement only when it stays within net profits and is awarded for victims, language both sides say controls. - The case could reset a split between the Second Circuit and the First and Ninth Circuits, with millions or billions of dollars in enforcement exposure at stake. (supremecourt.gov)
The Supreme Court heard arguments April 20 in Sripetch v. Securities and Exchange Commission over when the agency can force defendants to give up profits. (supremecourt.gov) The question is whether the Securities and Exchange Commission must prove investors suffered pecuniary harm before a court can order disgorgement in a civil enforcement case. Petitioner Ongkaruck Sripetch says the answer is yes. (supremecourt.gov) Disgorgement is the remedy that strips a defendant of ill-gotten gains. In securities cases, it has become one of the agency’s main ways to recover money beyond civil penalties and injunctions. (jdsupra.com) The legal fight traces back to Liu v. SEC, decided June 22, 2020. In Liu, the court said disgorgement can count as equitable relief only if it does not exceed net profits and is awarded for victims. (supremecourt.gov) Sripetch argues that “for victims” means the Securities and Exchange Commission must show investors actually lost money. The government says investors can still be victims of securities-law violations even when they did not suffer a measurable financial loss. (supremecourt.gov 1) (supremecourt.gov 2) The Supreme Court took the case on January 9, 2026, after a circuit split opened. The Second Circuit required pecuniary harm in SEC v. Govil, while the Ninth Circuit rejected that reading and sided with the First Circuit. (supremecourt.gov) (jdsupra.com) That split matters because the Second and Ninth Circuits are two of the main venues for Securities and Exchange Commission enforcement cases. The court’s question-presented report says millions, and possibly billions, of dollars are at stake. (supremecourt.gov) The stakes are also visible in the agency’s own numbers. A McGuireWoods summary of the argument says more than half of the $2.7 billion in monetary remedies the Securities and Exchange Commission obtained in fiscal 2025 came from disgorgement orders. (jdsupra.com) Congress also looms over the case. After Liu, lawmakers amended Section 21(d) of the Exchange Act in 2021 to add an express statutory basis for disgorgement, and both sides now argue over whether that amendment preserved Liu’s limits or broadened the remedy. (jdsupra.com) (supremecourt.gov) A ruling is expected by late June or early July, before the court’s term ends. Whatever the justices decide, the opinion will set one national rule for a remedy the Securities and Exchange Commission uses in cases involving fraud, offerings, trading, and digital assets. (jdsupra.com) (supremecourt.gov)
