Status quo? Supreme Court to decide whether the SEC has authority to seek disgorgement

This week, on March 3, 2020, the Supreme Court heard oral arguments in Liu v. SEC to determine whether the SEC has authority to seek disgorgement of ill-gotten gains in federal court.

Traditionally, federal courts have permitted the SEC to use its disgorgement power outside administrative proceedings, absent any explicit statutory provision authorizing such a remedy. The SEC has come to rely on disgorgement as a powerful enforcement tool. Indeed, in Fiscal Year 2019, parties in SEC enforcement actions were ordered to pay $3.248 billion in disgorgement of ill-gotten gains. Based on the remarks made by the Justices during oral arguments, it appears that the Court will most likely keep with custom and confirm that the SEC may seek disgorgement in civil proceedings as a form of equitable relief. At most, it seems like the Court may set a clearer standard on the calculation of disgorgement and the method of repayment of funds collected via disgorgement.

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