Debate over SEC disgorgement standard

1/ The legal fight is over a narrow but consequential question: when the SEC asks a court to order disgorgement — repayment of ill-gotten gains — must it also prove that investors actually lost money? The answer is unsettled because federal appeals courts split, and the Supreme Court is now reviewing that split in Sripetch v. SEC. 2/ The case comes out of an SEC civil enforcement action against Ongkaruck Sripetch in the Southern District of California. The SEC alleged pump-and-dump schemes involving microcap stocks, and a final judgment entered in 2025 followed an earlier consent and remedies process in district court. 3/ The specific disgorgement number in the appeal was $2,251,923.16 in net profits, plus prejudgment interest. (supremecourt.gov) The Ninth Circuit affirmed that award on September 3, 2025 and held the SEC did not need to show investors suffered pecuniary harm as a prerequisite to disgorgement under 15 U.S.C. § 78u(d)(5) or (d)(7). (sec.gov) 4/ That is why lawyers and policy accounts are talking about “proof burdens.” In plain terms, the dispute is whether the SEC must prove investor loss before it can force a defendant to give up profits, or whether showing wrongful gain is enough. The Ninth Circuit sided with the latter view. 5/ The split is not theoretical. (cdn.ca9.uscourts.gov) The Ninth Circuit said it agreed with the First Circuit’s decision in SEC v. Navellier & Associates, Inc. and rejected the Second Circuit’s contrary approach in SEC v. Govil, which required a showing of pecuniary harm to investors. 6/ The Supreme Court granted review on January 9, 2026. (cdn.ca9.uscourts.gov) Its docket frames the question as whether a showing that investors suffered pecuniary harm is a prerequisite to disgorgement in an SEC civil action. Oral argument was held on April 20, 2026. 7/ The argument traces back to the Court’s own 2020 decision in Liu v. ([cdn.ca9.uscourts.gov](https://cdn.ca9.uscourts.gov/datastore/opinions/2025/09/03/24-3830.pdf)) SEC. In the cert papers and later briefing, both sides centered on Liu’s statement that disgorgement is permissible if it does not exceed a wrongdoer’s net profits and is “awarded for victims.” The fight is over what “for victims” requires. 8/ Sripetch’s side says “for victims” means the SEC must show real economic injury to investors. (supremecourt.gov) In the April 20 argument, petitioner’s lawyer Daniel Geyser told the justices that “the SEC cannot seek disgorgement without showing investors suffered economic harm.” 9/ The government’s side says disgorgement historically focuses on the defendant’s unjust gains, not a separate damages-style showing of investor loss in every case. (supremecourt.gov) Amicus briefs supporting the SEC made the same point, arguing that disgorgement has not traditionally required proof of harm beyond the violation of legal rights. (supremecourt.gov) 10/ That is the backdrop for the online discussion tying Sripetch to “restitution” and “burden of proof.” Strictly speaking, the case is about SEC disgorgement authority in civil enforcement, but the debate overlaps with broader restitution concepts because both ask whether the remedy is measured by the defendant’s gain, the victim’s loss, or some combination of both. That framing is an inference from the briefs and opinions. (supremecourt.gov) 11/ The separate discussion about “neither admit nor deny” clauses comes from a different SEC action on May 18, 2026. The SEC said it rescinded Rule 202.5(e), ending the policy that required settling defendants not to publicly deny the agency’s allegations. Chairman Paul S. Atkins said the agency would also not enforce existing no-deny provisions already entered. (cdn.ca9.uscourts.gov) 12/ That policy change does not decide Sripetch, but it helps explain why the topics are being discussed together this week. One debate concerns what the SEC must prove to win disgorgement in court; the other concerns what defendants must agree to when settling with the SEC. Both involve the agency’s enforcement toolkit, but they are legally distinct. (sec.gov) 13/ The next concrete step is the Supreme Court’s decision in Sripetch v. SEC, which outside legal analyses say is expected by July 2026. Until then, the clearest verified facts are the circuit split, the $2.25 million award, the April 20 argument, and the SEC’s separate May 18 no-deny policy rescission. (foley.com) (sec.gov)