Supreme Court upholds limited SEC right to obtain disgorgement in court enforcement proceedings

On June 22 the U.S. Supreme Court issued its long-awaited decision in Liu v. Securities and Exchange Commission, No. 18-1501, which resolved a cloud over the SEC's remedial powers that had been hovering since 2017. In a decision written by Justice Sotomayor for an eight‑member majority, the Court held that disgorgement is an available remedy in an SEC enforcement action in federal court under 15 U.S.C. §78u(d)(5) (Section 78u(d)(5)). This provision of the Exchange Act entitles the SEC, in any federal court action for violations of the federal securities laws, to "any equitable relief that may be appropriate or necessary for the benefit of investors."

Although the Supreme Court upheld the SEC's authority to obtain disgorgement as "equitable relief" under Section 78u(d)(5), the Court recognized several limitations on the remedy, and left it to the lower courts to define further the contours of those limitations. The Court's open-ended ruling raises issues that likely will bedevil SEC enforcement proceedings for years to come.

The Supreme Court's decision can be viewed here.

Read More: Supreme Court upholds limited SEC right to obtain disgorgement in court enforcement proceedings


Download PDF Back To Listing
Loading data