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The Supreme Court Limits the SEC's Disgorgement Power

Alert June 7, 2017

The Supreme Court Limits the SEC's Disgorgement Power

June 7, 2017, Covington Alert

On Monday, in Kokesh v. SEC,1 the Supreme Court handed a major loss to the Securities and Exchange Commission, unanimously holding that SEC claims for disgorgement of ill-gotten gains are subject to a five-year statute of limitations. For decades, the SEC had taken the position that its disgorgement claims could reach back indefinitely, and recently obtained a judgment in another case ordering disgorgement based on conduct going back 18 years before the agency filed suit.2 The Kokesh decision also calls into question the proper measure of disgorgement (e.g., gross versus net profits) and even whether the SEC and potentially other federal government agencies have authority to seek disgorgement at all. 

 

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